Stock Growth: Factors and Implications

Factors Affecting Stock Growth

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Question

Which of the following does not affect the growth rate of earnings and dividends of a stock?

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Explanations

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A. B. C. D.

C

The growth rate is equal to the retention rate multiplied by the ROE. The retention rate is itself equal to one minus the dividend payout ratio. Changes in the risk premium affect the required rate of return on a stock. Changes in all these variables are used in the direction of change approach to estimate the earnings multiplier.