Exhibit 14.2 Use the Information Below for the Following Problem(S)

question 45

Multiple Choice

Exhibit 14.2
Use the Information Below for the Following Problem(S)
Modular Industries currently has a 16% annual growth rate while the market average is 6 percent. The market multiple is 10.
-Refer to Exhibit 14.2.Determine the justified P/E ratio for Modular Industries assuming Modular can maintain its superior growth rate for the next 5 years.

• A) 6.4
• B) 13.1
• C) 16.5
• D) 23.8
• E) 15.7

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Definitions:

High Inflation

A period characterized by a rapid increase in prices, eroding purchasing power.

Moderate Inflation

A situation where the general price level of goods and services rises at a modest rate over time.

Money Demand

The desired holding of financial assets in the form of cash or bank deposits, often influenced by interest rates and economic conditions.

Liquid Form

Refers to the physical state of a substance that is flowing and has no fixed shape but a definite volume.