The P/E ratio, or multiplier, is a measure of the relative price of a stock. All of the following are true except: If business risk increases for a firm, the P/E ratio will decrease, other things the same. Other things equal, as the required rate rises, the P/E ratio declines. A higher expected payout ratio has a clear-cut positive impact on the P/E ratio. A high P/E ratio is justified for a firm if it has a high growth rate. O The P/E ratio is conceptually a function of expected dividend payout ratio, required rate of return, expected growth rate in dividends.
The P/E ratio, or multiplier, is a measure of the relative price of a stock. All of the following are true except: If business risk increases for a firm, the P/E ratio will decrease, other things the same. Other things equal, as the required rate rises, the P/E ratio declines. A higher expected payout ratio has a clear-cut positive impact on the P/E ratio. A high P/E ratio is justified for a firm if it has a high growth rate. O The P/E ratio is conceptually a function of expected dividend payout ratio, required rate of return, expected growth rate in dividends.
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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Transcribed Image Text:The P/E ratio, or multiplier, is a measure of the relative price of a stock.
All of the following are true except:
If business risk increases for a firm, the P/E ratio will decrease, other things the same.
Other things equal, as the required rate rises, the P/E ratio declines.
O A higher expected payout ratio has a clear-cut positive impact on the P/E ratio.
A high P/E ratio is justified for a firm if it has a high growth rate.
The P/E ratio is conceptually a function of expected dividend payout ratio, required rate of return, expected
growth rate in dividends.
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