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NEW QUESTION: 1
Using the microanalysis approach to estimating a company's earnings multiplier, the multiplier is based on:
I. the dividend payout ratio
II. the required rate of return
III. the company's relationship to the industry
IV. the rate of growth
V. the estimated earnings per share
VI. the company's relationship to the market
A. I, II, IV
B. II, III, IV
C. III, VI
D. I, II, III
E. I, II, III, IV, V
The earnings multiplier, under the microanalysis approach, is estimated based on its three components:
the dividend payout ratio, the required rate of return, and the rate of growth. Under the Macroanalysis approach, it is estimated from the relationships among the firm, its industry and the market. The estimates derived from each approach are resolved to settle on one estimate.
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