A Common Problem When the Sustainable Growth Rate to Estimate

question 9

Multiple Choice

A common problem when the sustainable growth rate to estimate a stock's intrinsic value is:

• A) disagreement over how to calculate the company's ROE.
• B) the use of a discount rate that is greater than payout ratio.
• C) the unpredictable nature of dividend payouts
• D) sensitivity to year-to-year fluctuations in a company's earnings
• E) the need for growth companies to retain a greater proportion of earnings than value companies

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Definitions:

Future Years

Subsequent periods of time that have not yet occurred, often considered in planning, forecasting, or speculation.

Industrial Revolution

A period of major industrialization from the late 18th to early 19th century that transformed mainly agrarian, rural societies in Europe and America into industrialized, urban ones.

Steam Engine

A heat engine that performs mechanical work using steam as its working fluid, symbolizing the beginning of the industrial revolution.

Labor Force

The total number of people who are employed or actively seeking employment within an economy.