The Management Discussion and Analysis Section of the Annual Report

Multiple Choice

The Management Discussion and Analysis Section of the annual report:

A) is required by the SEC.
B) is optional but normally included in the annual report.
C) is required by the SEC only if the company has suffered from unfavorable trends or there are significant uncertainty concerning liquidity of the company.
D) is required by the SEC only if they have a qualified audit opinion.
You are analyzing a large stable company. For the year ending 12/31/05 the company reported earnings of $58,900K and book value at the end of 2005 was $371,700K. You expect earnings to grow at 5% a year in perpetuity, and the dividend payout ratio of 70% to continue. The company borrows at 8%, and has a cost of equity of 12%. The company has 25,000K shares outstanding.