The Price-Earnings Valuation Model Estimates the Price of a Share

question 59

Multiple Choice

The Price-Earnings valuation model estimates the price of a share of stock today as the:

• A)sum of a forward looking P/E multiple and the EPS in the next period.
• B)product of the firm's historic P/E multiple and the EPS in the next period.
• C)product of a forward looking P/E multiple and the EPS in the next period.
• D)product of a forward looking P/E multiple and the current EPS.

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Definitions:

Lesson

An instructional session or period where knowledge, skills, or concepts are taught.

Hoax

Anything designed to deceive another person either as a practical joke or for financial gain.

Practical Joke

A mischievous trick played on someone, generally causing the victim to experience embarrassment, perplexity, confusion, or discomfort.

Financial Gain

The increase in monetary resources resulting from the profitable operation of a business or other financial transactions.