Why price ratio considered a gauge of future earning power

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Reference no: EM131318371

1. Why is the price/earnings ratio considered a gauge of future earning power?

2. Why does a relatively new firm often have a low dividend payout ratio? Why does a firm with a substantial growth record and/or substantial growth prospects often have a low dividend payout ratio?

3. Why would an investor ever buy stock in a firm with a low dividend yield?

Reference no: EM131318371

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