QUESTIONS 79 THROUGH 90 RELATE TO EQUITY INVESTMENTS

80. An analyst gathers the following data for a company to estimate the expected

growth rate of dividends and use it as an input for valuing the company’s common

stock.

Return on Assets 10%

Profit Margin 5 %

Financial Leverage 1.67

Payout Ratio 25%

The company’s expected growth rate is closest to:

A. 4.2%.

B. 6.3%.

C. 12.5%.