If the P/E Ratio of a Company's Common Stock Were

question 13

Multiple Choice

If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:

• A)the market value of the common stock would be $20.83 per share.
• B)the market value of the common stock would be $25.00 per share.
• C)an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share.
• D)an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $1.67 per share.

---

Definitions:

Subduction Zone

A region of the Earth's crust where one tectonic plate moves under another, often creating a trench and volcanic activity.

Mantle-derived

Originating or derived from the Earth's mantle, the thick layer of rock below Earth's crust and above the core.

Meteoric Water

Water originating from precipitation, including rain, snow, or hail, that infiltrates the Earth's surface.

Large Magma Chambers

Underground pools of molten rock that feed volcanoes and can store huge volumes of magma beneath the Earth's surface.