EBK FOUNDATIONS OF FINANCIAL MANAGEMENT
17th Edition
ISBN: 9781260464900
Author: BLOCK
Publisher: MCGRAW-HILL LEARNING SOLN.(CC)
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Question
Chapter 20, Problem 7DQ
Summary Introduction
To explain: The possibility that the post-merger P/E will move in the direction opposite to the immediate post-merger earning per share.
Introduction:
Earnings per share (EPS):
It is the profit per outstanding share of a public company. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.
P/E ratio:
It is calculated by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.
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1
you have been provided with the following data D1=$1.27 PO=60 and G=8 constant. What is the cost of equity from retained earnings based on the DCF approach?
Which of the following formulas is INCORRECT?
O A. Div = EPS, X Dividend Payout Rate
OB. TE= (Div/P)+g
OC. PN(Eg) × Div N+1
O D. earnings growth rate= retention rate x return on new investment
Chapter 20 Solutions
EBK FOUNDATIONS OF FINANCIAL MANAGEMENT
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- Q11:- Why are financial ratios an effective method for Analysing company performance? What is the Degree of Total Leverage? What is diluted earnings per share (diluted EPS)?arrow_forwardQ . Which of the following statements is not true?a) The return on shareholders’ funds can be calculated as profit after tax /total equity x 100b) The dividend cover ratio can be calculated from the Income statement andthe statement of cash flows and the answer will be the samec) The interest cover ratio can be calculated from the income statement andthe statement of cash flows and the answer will be differentd) The operating profit margin is also called the net profit marginarrow_forwardWhat does the price/earnings (P/E) ratio show? If one firm’s P/E ratio is lower thanthat of another firm, what factors might explain the difference?arrow_forward
- which one is correct please confirm? QUESTION 10 Firms with the ____ earnings growth tend to have the ____ dividend payout ratio. a. lowest; highest b. lowest; lowest c. highest; lowest d. highest; highestarrow_forward10. What is the distinction between a stock and a flow variable? How does the stock & flow variable distinction impact the reporting and organization of financial information? Financial ratios derived from accounts are unit free. How will you use financial ratios to analyze firms?arrow_forwardProvide a 2 problems with own solution in EARNINGS PER SHARE performance ratio. Provide an textual interpretation. Thanks!! Use this formula. Earnings per share = profit after tax ÷ number of shares.arrow_forward
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