A Weakness of the PE Approach to Valuing Stock Is

question 57

Multiple Choice

A weakness of the PE approach to valuing stock is that it is

• A) difficult to estimate the constant growth rate of a firm's dividends.
• B) difficult to estimate the required return on equity.
• C) difficult to predict how much a firm will pay in dividends.
• D) based on industry averages rather than firm-specific factors.

---

Definitions:

Savings Account

A bank account where money is kept so that it can earn interest over time, typically used for holding funds that are not needed for daily expenses.

Annual Simple Interest

Interest calculated once a year on the principal sum, without compounding.

Earned

Received as a result of work or effort.

Simple Interest Rate

The rate at which simple interest is calculated, usually on an annual basis.