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(a) (iv)(2) dvm using Gordon’s growth model
Sir isn’t b= RE/PAT
So that means 47.2/10.1?b is the proportion of earnings that are retained. The amount retained is the earnings less the dividends.
So if, for example, you only had the figures for 2009, the earnings are 8.5 and the amount retained would be 8.5 – 5 = 3.5. So b would then be 3.5/8.5
In this particular question, because there are several years, the examiner has calculated an average by dividing the total retention by the total earnings.
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