Which One of These Formulas Will Provide an Estimate of the Growth

question 30

Multiple Choice

Which one of these formulas will provide an estimate of the growth rate of a security's dividends?

• A)Beta × Return on equity
• B)Retention ratio × Weighted average cost of capital
• C)Retention ratio × Return on equity
• D)Beta × Return on assets
• E)Retention ratio × Return on assets

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Definitions:

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, usually on an annual basis.

Rationing Function

The process through which prices distribute scarce goods and services among individuals who demand them, effectively limiting the quantity that consumers can purchase.

Incentive Function

The aspect of economic policy or mechanism designed to motivate individuals or entities to act in a certain way by offering rewards.

Labor's Share

The portion of national income or the total output of the economy that is allocated to workers in the form of wages and salaries.