What Does a P/E Ratio of 10 Indicate

question 29

Multiple Choice

What does a P/E ratio of 10 indicate?

• A) It would take 10 years for an investor to recover his or her initial investment.
• B) The firm will pay a dividend of $10 per share.
• C) The value of the stock will be 10 times the initial investment at the time of maturity.
• D) A stock's value will increase by 10 percent every year.
• E) An investor would receive 10 percent of the total earnings of the firm, at the time of liquidation.

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