Asked by
Julya Harutunyan
on Oct 19, 2024
Verified
Firms with higher expected growth rates tend to have P/E ratios that are ________ the P/E ratios of firms with lower expected growth rates.
A) higher than
B) equal to
C) lower than
D) There is not necessarily any linkage between risk and P/E ratios.
P/E Ratios
The Price to Earnings ratio, a valuation metric used to compare the market value of a stock to its earnings per share, indicating how much investors are willing to pay per dollar of earnings.
Expected Growth Rates
Forecasts of how fast particular economic indicators, such as sales or earnings, will grow over a specified period.
- Assess and interpret the role of Price-Earnings (P/E) ratios and how they respond to assorted factors.
- Assess the consequences of growth rates on dividend payments and the subsequent valuation of shares.
Verified Answer
AS
Learning Objectives
- Assess and interpret the role of Price-Earnings (P/E) ratios and how they respond to assorted factors.
- Assess the consequences of growth rates on dividend payments and the subsequent valuation of shares.