A Firm Has a ROE of 20% and a Market-To-Book

question 60

Multiple Choice

A firm has a ROE of 20% and a market-to-book ratio of 2.38.Its P/E ratio is _________.

• A) 8.40
• B) 11.90
• C) 17.62
• D) 47.60

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Definitions:

Ex-dividend

The ex-dividend date is the date on which a stock begins trading without the entitlement to receive the most recently declared dividend, meaning buyers from that day onward will not receive the dividend.

Marginal Tax Rate

Amount of tax payable on the next dollar earned.

Cost of Equity

Cost of equity is the return that investors expect from an investment in a company, considering the risk of investing in its equity.

Stock Split

An action taken by a company to divide its existing shares into multiple shares to boost the liquidity of the shares, though the market value of the company does not change.