4. A low-risk profitable firm intends to maintain its 60% dividend payout ratio into the future. It doesn't forecast any buybacks or equity raisings and is expected to always remain profitable.

Over time, this firm's 'retained profits' on the balance sheet would be expected to:

a. Grow.

b. Remain unchanged.

c. Remain unchanged

d. Insufficient information.

5. Adam Schwab wrote that "Atlassian is one of the worlds most overvalued businesses by almost any metric. Even though it loses money, Atlassian trades on a multiple of price to sales of a comical 25 times. Stern did a comparison of price-sales multiples in January 2022, noting that the multiple for the entire market was 2.88 and for software (this was before the bubble popped) was 16 times."

Which of the following explanations is NOT correct? Atlassian's stock may be fairly priced if investors believe that its expected future:

a. Sales growth will (continue) to be higher than the US software industry's.

b. Profit margins will improve and be higher than the US software industry's.

c. Required returns on debt, equity and assets (WACC) will be lower than the US software industry's due to lower US government bond yields.

d. Revenues, profits and cash flows will have a low correlation with the S&P500 and US GDP growth, so its asset and equity betas and WACC will be lower than the US software industry's.

Correct Answer With Explanation will thump up. Thank you So Much In Advanced.