Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![Calculate the P/E ratio
Baxter has a retention ratio of 63%, a ROE of 15%, and a discount rate of 12%. What is its
P/E ratio (assuming the market correctly values the company)?
Hint: Remember the earlier class material (also on slide 43 --> ROE retention = growth.
Not that this says what the retention ratio is... do you need the retention ratio or
something else that can be calculated knowing the retention ratio in the numerator of the
P/E equation?
Note: Enter your answer with two decimals.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F90eb1610-f188-4898-9074-e74ef7815b36%2F11e710a1-6602-47a4-9633-c47a5652f8fe%2F615on_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Calculate the P/E ratio
Baxter has a retention ratio of 63%, a ROE of 15%, and a discount rate of 12%. What is its
P/E ratio (assuming the market correctly values the company)?
Hint: Remember the earlier class material (also on slide 43 --> ROE retention = growth.
Not that this says what the retention ratio is... do you need the retention ratio or
something else that can be calculated knowing the retention ratio in the numerator of the
P/E equation?
Note: Enter your answer with two decimals.
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