Union Enterprise Has an Expected Profit Margin of 12%, Turnover

question 66

Multiple Choice

Union Enterprise has an expected profit margin of 12%, turnover ratio of 1.5, and a leverage ratio of 0.8.Union plans to distribute 45% of its expected earnings of $1 million as a dividend next year.What is the firm's P/E ratio if the risk-free rate is 4.75% and the risk premium associated with the shares is 6.75%?

• A)8.96
• B)10.48
• C)12.57
• D)15.23

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Definitions:

Goodwill

Goodwill is an intangible asset that arises when a business is acquired for more than its fair value, attributed to non-physical assets like reputation or brand name.

Acquisition-Date Fair Value

The measurement of an asset's or liability's market value at the exact day a business combination is executed.

Acquisition Method

An accounting approach used for consolidating the financial statements of a group where one entity has control over the others.

Noncontrolling Interest

An ownership interest in a subsidiary that is not large enough to control the company's operations, often represented as a separate component of equity in the consolidated financial statements.