Electronics Galore Has Historically Had a P/E Ratio of 23

question 7

Multiple Choice

Electronics Galore has historically had a P/E ratio of 23.4.This ratio is considered a good estimate of the future ratio.The firm currently has EPS of $1.68.These earnings are expected to increase by 4.2 percent next year.What is the expected price of this stock one year from now?

• A)$39.31
• B)$40.96
• C)$41.25
• D)$42.78
• E)$43.79

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Definitions:

Service Department Costs

The expenses incurred by support departments within a company that do not directly contribute to profit but provide necessary services.

Operating Departments

Sections or divisions within a business that are responsible for carrying out its core operations, as opposed to support or administrative departments.

Direct Method

A way of preparing a cash flow statement where actual cash flows from operating activities are listed directly.

Service Department Costs

Expenses associated with departments that do not directly produce goods but provide support services, such as maintenance or security.