The Market-Capitalization Rate on the Stock of Flexsteel Company Is

question 28

Multiple Choice

The market-capitalization rate on the stock of Flexsteel Company is 12%. The expected ROE is 13%, and the expected EPS are $3.60. If the firm's plowback ratio is 50%, the P/E ratio will be

• A) 7.69.
• B) 8.33.
• C) 9.09.
• D) 11.11.
• E) None of the options are correct.

---

Definitions:

AVC (Average Variable Cost)

The cost of labor, materials, and other variable expenses divided by the quantity of output produced, excluding fixed costs.

AFC (Average Fixed Cost)

The fixed costs (expenses that do not change with the level of production) divided by the quantity of goods or services produced, typically decreasing as production increases.

Marginal Cost

The cost increase that comes with producing an additional unit of a product or service.

Marginal Revenue

The heightened income realized from the sale of one more unit of a good or service.