A Firm Has a ROE of 20% and a Market-To-Book

question 60

Multiple Choice

A firm has a ROE of 20% and a market-to-book ratio of 2.38.Its P/E ratio is _________.

• A) 8.40
• B) 11.90
• C) 17.62
• D) 47.60

---

Definitions:

Interest Rate

The percentage at which interest is paid by borrowers for the use of money that they borrow from a lender.

Inflation Rate

The percentage increase in the general level of prices for goods and services over a certain period, reflecting the decreasing purchasing power of money.

Rational Person

An individual who systematically and logically evaluates options to make decisions that maximize their personal benefit or utility.

Present Value

The present worth of a sum of money or series of cash flows anticipated in the future, calculated using a certain rate of return.