A Company Is Expected to Have a Value of $142,857

question 35

Multiple Choice

A company is expected to have a value of $142,857 at the start of next period and investors require a 14 percent return on equity capital.Using the assumptions of the price-earnings ratio,what would be the company's earnings for the current year?

• A) $20,000
• B) $14,286
• C) $2,800
• D) $12,500

---

Definitions:

Planning Budget

A budget prepared for a specific level of activity, outlining expected revenues, expenses, and resource requirements.

Employee Salaries

Regular payments made to employees for performing their job duties.

Service Company

A business that earns revenue by providing intangible products or services, as opposed to selling physical goods.

Indirect Labor

The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products.