A Compute the Price-Earnings Ratio Under the Following Sets of Assumptions

question 3

Essay

a. Compute the price-earnings ratio under the following sets of assumptions:
$\begin{array}{|l|l|l|l|}\hline & \text { Cost of Equity } & \text { Growth Rate } & \text { P/E } \\\hline \text { Scerario } & \text { Capital } & \text { in Earuings } & \text { Ratio } \\\hline 1 & 0.12 & 0.08 & \\\hline 2 & 0.12 & 0.10 & \\\hline 3 & 0.14 & 0.08 & \\\hline 4 & 0.17 & 0.08 & \\\hline 5 & 0.17 & 0.10 & \\\hline & & & \\\end{array}$
b. Assess the sensitivity of the price-earnings ratio to changes in the cost of equity capital and changes in the growth rate.

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Definitions:

Aristotelian Approach

A philosophical methodology based on the teachings of Aristotle, focusing on the concrete and particular, emphasizing purpose, and considering the ethical implications of actions.

Inherent Human Nature

Fundamental characteristics and instincts common to all humans.

Virtue

Moral excellence and righteousness; an inclination to do good and avoid wrong.

Directly Conflicts

Occurs when two or more elements or interests are in opposition, creating a scenario where the satisfaction of one necessarily leads to the dissatisfaction of the other(s).