Exhibit 12.3 Use the Information Below for the Following Problem(S)

question 2

Multiple Choice

Exhibit 12.3
Use the Information Below for the Following Problem(S)
Assume that the dividend payout ratio will be 55 percent when the rate on long-term government bonds falls to 9 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 8 percent and investors will require a 7 percent return. The return on equity will be 13 percent.
-Refer to Exhibit 12.3.What is your expectation of the market P/E ratio?

• A) 37.69
• B) 24.92
• C) 58.15
• D) 55.02
• E) 47.82

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Definitions:

UPS

Uninterruptible Power Supply; a device that provides emergency power to a load when the input power source fails.

Air Vents

Openings designed to allow air to enter or exit a space or component, used for cooling, ventilation, or air circulation.

External Hard Drive

A portable storage device used to back up or store files, connected to a computer or another device via USB or another interface.

Internal Hard Drive

A data storage device located inside a computer that stores all types of digital information.