Currently, a Firm Has a Benchmark PE of 11

question 102

Multiple Choice

Currently, a firm has a benchmark PE of 11.7 and an EPS of $3.20. Earnings are expected to grow 3.2 percent annually. What is the implicit rate of return?

• A) 3.20 percent
• B) 2.89 percent
• C) 4.08 percent
• D) 3.67 percent
• E) 4.23 percent

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Definitions:

Allowance Method

An accounting technique used to account for bad debts by estimating uncollectible accounts at the end of each period.

Receivables

Money owed to a business by its customers for goods or services delivered or used but not yet paid for.

Allowance Method

An accounting technique to estimate and account for bad debts, where anticipated uncollectible accounts receivable are predicted and recorded.

Uncollectible Receivables

Accounts receivable that cannot be collected from customers, often recognized as a bad debt expense.