The price to earnings ratio (P/E) is determined by: Question 6 options: 1) expected dividend payout ratio 2) estimated required return on the stock 3) expected growth rate of dividends 4) b and c only 5) all the above

P/E ratio stands for Price-Earning ratio. It is that accounting ratio which tells that how much an…

Answered: he price to earnings ratio (P/E) is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

Consider the following simplified APT model: Factor Expected Risk Premium Market 6.4% Interest Rate -0.6% Yield Spread 5.1% Factor Risk Exposures Market Interest Rate Yield Spread Stock Stock(b1) (b2) (b3) P 1.0 -2.0 -0.2 P2 1.2 0 0.3 P3 0.3 0.5 1.0 Required: 1. Calculate the expected return for the above stocks. Assume risk free rate is 5%. Consider a portfolio with equal investments in stocks P, P2 and P3 2.What are the factor risk exposures for the portfolio? 3.What is the portfolio’s expected return?
Discuss how to determine the risk or beta of a stock, the required rate of return of a stock and the value of a stock. How do you determine if a stock has high or low or average risk when compared to the S&P 500? How do you determine if a stock is overpriced, underpriced or fairly priced? Explain and Discuss.
When a market order is placed, the price that is paid for the stock is the a. stock's fundamental value. b. market price at time of the execution. c. quoted price. d. market price at time of the quote.
The Expected Rate of Profit Formula looks at: A. Expected Profit & Money Invested B. Common Stock & Preferred Stock C. Expected Profit & Bonds D. All of the above
One way to model an option with dividends in the binomial framework is for the stock price minus the present value of the dividends to grow by the up and down factors. True or False?
Let's explore the difference between "expected" and "actual" return of a stock. 1) How might we calculate what the expected return of a stock should be? 2) How might we calculate the "actual" return of a stock?
How do stock prices vary with the following: 1. the expected growth rate of dividends (earnings); 2. the benchmark (risk-free) interest rate: 3. the equity premium
A higher growth rate (g) will affect the P/E ratio as follows Question 9 options: 1) Increase the earnings multiplier (P/E ratio) 2) Decrease the earnings multiplier 3) It depends upon the growth rate of the required return of the stock 4) None of the above
The cost of preferred stock: a. is equal to the dividend yield b. is independent of the stock's price c. is equal to the YTM d. depends on dividend's growth rate
The text identifies three methods for estimating the cost of common stock from reinvested earnings (not newly issued stock): the CAPM method, the dividend growth method, and the bond-yield-plus-risk-premium method. However, only the CAPM method always provides an accurate and reliable estimate. Group of answer choices True False
26. From the given options, which one reflects the operational performance of the firm during a particular period? a. Balance sheet only b. Only income statement c. Statement of equity only d. All of the options
Which of the following is NOT used by analysts to value stocks? * P/E Ratio P/ Assets Ratio P/Sales Ratio P/CF (cashflow) Ratio

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