7. Constant growth rates

One of the most important components of stock valuation is a firm's estimated growth rate. Financial statements provide the information needed to estimate the growth rate. Consider this case: Robert Giliman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant orowth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available: - Pan Asla Mining Co.'s stock (Ticker: PaMC) is trading at $18.75. - The company's stock is expected to pay a year-end dividend of 50.90 that is expected to grow at a certain rate. - The stock's expected rate of return is 9.00%. Eased on the information Just given, what will be Robert's forecast of PAMC's growth rate? Which of the following statements accurately describes the relationship between earnings and dividends when all other factors are beld conitant? Long-run earnings growth occurs primarily because firms pay dividenos to reward their shareholders for investing in the company, Aletaining a higher percentage of earnings will result in a higher gronth rate. Growth in earnings requires orowth in dividends