Case 8: Georgia Atlantic Company: Directed QUESTIONS 1. For

Case 8: Georgia Atlantic Company: Directed QUESTIONS 1. For each of the years listed in Table 2, what is Georgia Atlantic’s annual earnings per growth rate, its P/E ratio, and its market/book ratio? Compare your answers with the indust averages shown in Table 2. What can be inferred about Georgia Atlantic’s dividend policy share from these data?

2. Do you think it is better for firms in general, and for Georgia Atlantic in particular, to have an announced dividend policy?

3. In general, how is a firm’s growth rate in earnings affected by its dividend policy? What does this imply about Georgia Atlantic’s historical rate of return on investment vis-à-vis that of the average lumber company? (Hint: Consider the retention growth model, g br, where g = growth rate in EPS, b = retention ratio, and r = return on equity.)

4. Evaluate the family’s argument that higher-priced stocks are more attractive to investors because the percentage transactions costs on such issues are lower. Is this a valid argument? Do you think Georgia Atlantic’s current per-share price is “optimal” in the sense that the value of the shares to investors is maximized?