Which of the Following Statements Is CORRECT

question 13

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm has the highest price/earnings ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
• B) If a firm has the highest market/book ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
• C) Other things held constant, the higher a firm's expected future growth rate, the lower its P/E ratio is likely to be.
• D) The higher the market/book ratio, then, other things held constant, the higher one would expect to find the Market Value Added (MVA).
• E) If a firm has a history of high Economic Value Added (EVA) numbers each year, and if investors expect this situation to continue, then its market/book ratio and MVA are both likely to be below average.

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Definitions:

Markets

Venues or systems within which commercial transactions between buyers and sellers take place, involving goods, services, or securities.

Dominican Pesos

The official currency of the Dominican Republic, used for all financial transactions within the country.

Foreign Currency

Currency used in a country other than one's own, representing the medium of exchange from foreign nations.

Government

The system or group of people governing an organized community, often a state, and the authority to make and enforce laws.