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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
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[27] Choose the correct answer w/ explanation. JFINEX Corporation has been on a downturn for the past four years with a negative balance in retained earnings. However, the stock price is PhP 5 per share. Which of the following is most correct?

  • The accountants must have made a mistake
  • The required rate of return will be small
  • Stockholders believe the stock is worth PhP 5 because future free cash flows are expected to be positive
  • Investors are irrational to invest PhP 5 when EPS have been negative for the past four years
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