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 Gillman, 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 growth rate that he should use while valuing Pan Asia Mining Company.

Robert has the following information available:

$$ Pan Asia Mining Company$$s stock $($Ticker: PAMC$)$ is trading at $$18\mathrm{.}75.$

$$ The company has forecasted net income and book value of equity for the coming year to be $$1,183,500$ and $$9,262,500,$ respectively.

$$ The company has also been paying dividends for the past $8$ years and has maintained a dividend payout ratio of $37\mathrm{.}50\%.$

Based on this information, Robert$$s forecast of PAMC$$s growth rate in earnings and dividends should be:

A$.-25\mathrm{.}18\%$

B$.7\mathrm{.}19\%$

C$.7\mathrm{.}99\%$

D$.0\mathrm{.}38\%$

Which of the following statements accurately describes the relationship between earnings and dividends when all other factors are held constant?

A$.$Paying a higher percentage of earnings as dividends will result in a higher growth rate.

B$.$ Long$-$run earnings growth occurs primarily because firms retain earnings and reinvest them in the business.

C$.$ Dividend growth and earnings growth are unrelated.