Consider the following scenario and complete the last column and then Assess the sensitivity of the price-earnings ratio to changes in the cost of equity capital and changes in the growth rate: Table 9 Estimating price earning(P/E) ratios under various scenarios Scenario Cost of Equity Capital Growth Rate in Earnings P/E Ratio 1 0.13 0.09 2 0.13 0.11 3 0.15 0.09 4 0.18 0.09 5 0.18 0.11
Consider the following scenario and complete the last column and then Assess the sensitivity of the price-earnings ratio to changes in the cost of equity capital and changes in the growth rate: Table 9 Estimating price earning(P/E) ratios under various scenarios Scenario Cost of Equity Capital Growth Rate in Earnings P/E Ratio 1 0.13 0.09 2 0.13 0.11 3 0.15 0.09 4 0.18 0.09 5 0.18 0.11
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
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Consider the following scenario and complete the last column and then Assess the sensitivity of the price-earnings ratio to changes in the
Table 9
Estimating price earning(P/E) ratios under various scenarios
Scenario |
Cost of Equity Capital |
Growth Rate in Earnings |
P/E Ratio |
1 |
0.13 |
0.09 |
|
2 |
0.13 |
0.11 |
|
3 |
0.15 |
0.09 |
|
4 |
0.18 |
0.09 |
|
5 |
0.18 |
0.11 |
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