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:

Zimbardo

Refers to Philip Zimbardo, a psychologist known for conducting the Stanford prison experiment, which explored the effects of perceived power and authority on behavior.

Social Categorisation

The process by which individuals classify others into groups based on shared characteristics.

Social Creativity

Group-based behavioural strategies that improve social identity but do not directly attack the dominant group’s position.

Social Change

The transformation over time of cultural values, norms, and social structures, leading to significant shifts in society.