Exhibit 12.4 Use the Information Below for the Following Problem(S)

question 120

Multiple Choice

Exhibit 12.4
Use the Information Below for the Following Problem(S)
Assume that the dividend payout ratio will be 45 percent when the rate on long term government bonds falls to 9 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 7 percent and investors will require a 16 percent return. The return on equity will be 14 percent.
-Refer to Exhibit 12.4.What is the expected sustainable growth rate?

• A) 4.95
• B) 7.2
• C) 8.8
• D) 6.3
• E) 7.7

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Definitions:

Semantic Priming

A psychological effect in which the understanding or processing of a word is influenced by a prior exposure to a semantically related word or concept.

Episodic Memory

Memory for specific events and experiences.

Automatization

The process by which a skill becomes automatic with practice, requiring less conscious thought and effort to perform.

Spreading Activation

A mechanism within associative networks that explains how information is retrieved in the brain, where thinking about one concept activates related concepts.