The constant growth valuation formula has dividends in the numerator. Dividends are divided by the difference between the required return and dividend growth rate as follows: D (-8) Which of the following statements best describes how a change in a firm's stock price would affect a stock's capital gains yield? The capital gains yield on a stock that the investor already owns has an inverse relationship with the firm's expected future stock price. The capital gains yield on a stock that the investor already owns has a direct relationship with the firm's expected future stock price. Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $1.25 at the end of the year. Its dividend is expected to grow at a constant rate of 6.00% per year. If Walter's stock currently trades for $16.00 per share, what is the expected rate of return? 654.69% 13.81% 607.37% 1,021.25% Which of the following conditions must hold true for the constant growth valuation formula to be useful and give meaningful results? The required rate of return, rs, must be greater than the long-run growth rate. The company's growth rate needs to change as the company matures. The company's stock cannot be a zero growth stock. 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 Co. Robert has the following information available: Pan Asia Mining Co.'s stock (Ticker: PAMC) is trading at $16.25. The company's stock is expected to pay a year-end dividend of $0.78 that is expected to grow at a certain rate. The stock's expected rate of return is 7.80%. Based on the information just given, what will be Robert's forecast of PAMC's growth rate? 7.75% 2.49% 4.50% 3.00% Which of the following statements accurately describes the relationship between earnings and dividends when all other factors are held constant? All else being equal, growth in dividends requires growth in earnings. Retaining a higher percentage of earnings will result in a lower growth rate. Long-run earnings growth will decrease when firms retain earnings and reinvest them in the business