ART Has Come Out with a New and Improved Product

question 57

Multiple Choice

ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3 per share. Investors expect a 12% rate of return on the stock.
-At what P/E ratio would you expect ART to sell?

• A) 8.33
• B) 11.43
• C) 14.29
• D) 15.25

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