GFM,IncEarned $4 a Share Last Year and It Is Expected

question 78

Multiple Choice

GFM,Inc.earned $4 a share last year and it is expected to earn $5 a share next year.Assuming a P/E ratio of 10,the price of the company's stock should be

• A)$40 a share.
• B)$50 a share.
• C)$90 a share.
• D)$0.50 a share.

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Definitions:

Terracing

The practice of shaping steep terrain to provide flat areas suitable for agriculture or ranching, or to protect soil from erosion.

Erosion

The transportation of sediment, soil, rocks, and other materials by the actions of wind, water, or ice, often leading to the reshaping of landforms.

Angle of Repose

The steepest angle at which a sloping surface formed of a particular loose material is stable.

Slope Failure

The sudden or gradual collapse of a slope that is too steep for its material to resist the pull of gravity.