A Firm with Earnings Per Share of $3 and a Price-Earnings

question 64

Multiple Choice

A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of

• A)$60.00.
• B)$15.00.
• C)$6.67.
• D)The market assigns a stock price independent of EPS and the P/E ratio.

Understand the concept and process of constructing zero-investment portfolios for arbitrage.

Differentiate between the CAPM and APT in terms of assumptions and applications.

Understand the concept of culture in the context of values, ideas, and attitudes shared among members of a group.

Recognize the legal implications of business practices and the distinction between ethical and legal behaviors.

---

Definitions:

Sales Revenues

The total amount of income received by a company from its sales of goods or services, before any expenses are subtracted.

Useful Life

The estimated duration of time a fixed asset is expected to be usable for its intended purpose.

Equipment

Equipment consists of the tools, machinery, and other durable assets used in the production of goods or services.

Intangible Benefits

Non-quantifiable advantages provided by goods or services, such as brand reputation or employee satisfaction.