In Applying the Variable-Growth Dividend Valuation Model to a Company's

question 18

Multiple Choice

In applying the variable-growth dividend valuation model to a company's stock, analysts frequently define the growth rate, g, as equal to

• A) ROE multiplied by the firm's retention rate.
• B) ROE divided by the dividend payout ratio.
• C) the dividend payout ratio multiplied by the firm's retention rate.
• D) P/E multiplied by the dividend payout ratio.

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Definitions:

Nominal Scale

The scale of measurement for a variable when the data are labels or names used to identify an attribute of an element. Nominal data may be nonnumeric or numeric.

Ordinal Scale

A ranking scale used to measure variable where the order of values is significant, but the difference between values is not uniform.

Rank Order

A method of arranging data points based on their value, from highest to lowest or vice versa.

Measurement

The process or the result of determining the size, length, or amount of something, usually according to a set of standard units.