A Firm Is Expected to Generate Earnings of $2

question 74

Multiple Choice

A firm is expected to generate earnings of $2.22 per share next year. The mean ratio of share price to expected earnings of competitors in the same industry is 15. Based on this information, the valuation of the firm's shares based on the price-earnings (PE) method is

• A)$2.22.
• B)$6.76.
• C)$33.30.
• D)none of the above

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Definitions:

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