A Firm Has a P/E Ratio of 0 $2.40$

question 11

Multiple Choice

A firm has a P/E ratio of 0.80 and a cost of capital of 5% p.a.and has expected growth of dividends in perpetuity of 2% p.a.What is the share price of the firm?

• A) \( 2.40 \)
• B) \( 24.33 \)
• C) \( 26.67 \)
• D) \( 32.25 \)

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Definitions:

Cylinder Leakage Test

A test performed on a suspect cylinder to determine where the pressure is going. The cylinder leak detector uses the shop air supply and a regulator to pressurize the cylinder, and the rate of leakage is displayed on the gauge.

Throttle Body

A component of the air intake system that controls the amount of air flowing into an engine's combustion chamber.

Burned Intake Valve

A valve in the engine that has been damaged by excessive heat, leading to loss of efficiency or engine failure.

Power Balance Test

A test used to determine if each cylinder is contributing power to overall engine output. During the test, fuel injectors are disabled and the change in engine rpm is recorded. If a cylinder is not producing power, there will not be an rpm drop when that cylinder’s injector is disabled, alerting you to the problem cylinder.