Which of the Following Is Not a Reason the PE

question 94

Multiple Choice

Which of the following is not a reason the PE ratio method may result in an inaccurate valuation for a firm?

• A)potential errors in the forecast of the firm's beta
• B)potential errors in the forecast of the firm's future earnings
• C)potential errors in the choice of the industry composite used to derive the PE ratio
• D)All of the above are reasons the PE ratio method may result in an inaccurate valuation for a firm.

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Definitions:

Bell-Shaped Curve

A graph describing the normal distribution, showing most instances occurring near the mean and fewer instances as one moves farther from the mean.

Intelligence

The ability to learn, understand, and apply knowledge, solve problems, and adapt to new situations.

Mental Age

A concept used to describe the intellectual capability of a person (often a child) compared to the average intellectual performance in their actual chronological age group.

Binet-Simon Scale

A tool developed in the early 20th century to measure an individual's intelligence and mental age.