Exhibit 14.3 Use the Information Below for the Following Problem(S)

question 64

Multiple Choice

Exhibit 14.3
Use the Information Below for the Following Problem(S)
Harcourt Industries currently has an 18% annual growth rate while the market average is 8 percent. The market multiple is 12.
-Refer to Exhibit 14.3.Determine the justified P/E ratio for Harcourt Industries assuming Harcourt can maintain its superior growth rate for the next 9 years.

• A) 5.98
• B) 13.13
• C) 21.20
• D) 58.68
• E) 26.65

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Definitions:

Labor Cost

The total amount of financial compensation paid to employees for their work, including wages, benefits, and taxes.

Variable Manufacturing Overhead

Costs of manufacturing that change with production volume, such as utilities or indirect materials, not fixed over the short term.

Machine-Hours

A measure used in manufacturing to allocate costs to products or job orders based on the number of hours a machine is used.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead costs to products, calculated before the production period begins.