How Much Should a Share of Stock Be Worth for a Firm

question 15

Multiple Choice

How much should a share of stock be worth for a firm whose earnings per share are $4 if the industry's average P/E is 11?

• A)$40
• B)$44
• C)$48
• D)$88

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Definitions:

Incompatible Motivations

Desires or goals that conflict with one another, making it difficult or impossible to achieve them simultaneously.

Behavioural Impulses

Behavioural impulses are spontaneous urges to act in certain ways, often without conscious deliberation, driven by psychological or physiological needs.

Conflict

A situation or process that involves opposing actions or viewpoints, leading to a state of tension or disagreement.

Pressure

The application of force upon a surface by an object, fluid, etc., in contact with it or the stress or urgency of matters demanding attention.