A Company Is Expected to Maintain a Payout Ratio of 50

question 21

Multiple Choice

A company is expected to maintain a payout ratio of 50 per cent of earnings. The appropriate discount rate for this risk class is 15 per cent and the expected growth rate in earnings and dividends is 6 per cent. What is the PER?

• A) 3.3
• B) 5.5
• C) 6.6
• D) 4.4

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Definitions:

Economic Predictions

Forecasts about future economic conditions based on current and historical data analysis.

Overestimating Knowledge

The tendency to believe one knows more about a subject or topic than one actually does.

Retention of Material

The ability to remember and recall information, skills, or knowledge over time after initial learning has taken place.

Hindsight Bias

The inclination to feel, after something has happened, that one would have foreseen or anticipated the result.