Estimating an Earnings Multiplier | Test Prep

Specific Estimate Approach

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Question

The specific estimate approach to estimating an earnings multiplier involves

Answers

A. inferring the direction of change in the multiplier based on derivations of specific estimates for its three major components.

B. inferring the direction of change in the multiplier based on predictions for change in its ten major components.

C. inferring the direction of change in the multiplier based on predictions for changes in its three major components.

D. inferring the direction of change in the multiplier based on derivations of the specific estimates for its ten major components.

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Explanations

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A. B. C. D.

The specific estimate approach derives a specific estimate for the earnings multiplier based on a range of estimates of the dividend payout ratio, the required rate of return, and the growth rate in earnings and dividends.

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