MTB Surfboards Has a P/E of 20

question 34

Multiple Choice

MTB Surfboards has a P/E of 20.The discount rate for this firm is 30 percent.They had earnings of $2,000,000 and 100,000 shares of common stock outstanding.What should be the current price of the stock?

• A) $120.00
• B) $60.00
• C) $600.00
• D) $400.00
• E) $200.00

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Definitions:

Average Annual

refers to the yearly average of any given set of data, often used in financial contexts to denote the average return, cost, or other financial metrics over a year.

Discount Rate

The interest rate used to determine the present value of future cash flows, or the rate at which central banks lend to financial institutions.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows, used in capital budgeting to assess the profitability of an investment.

Profitability Index

A capital budgeting tool used to measure the relative profitability of an investment, calculated by dividing the present value of future cash flows by the initial investment cost.