The P/E Ratio for the Last 12 Months for the Company

question 46

Multiple Choice

The P/E ratio for the last 12 months for the company below is most likely to be calculated as which of the following? $\begin{array}{|l|r|r|r|r|}\hline \text { Four most recent quarters } & Q 1 & Q 2 & Q 3 & Q 4 \\\hline \text { EPS } & \$ 0.36 & \$ 0.42 & \$ 0.43 & \$ 0.39 \\\hline \text { Share Price } & \$ 42 & \$ 56 & \$ 62 & \$ 40 \\\hline\end{array}$

• A)26.6
• B)31.25
• C)0.01
• D)25.0

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Definitions:

Constant Dividend Growth Model

A method to estimate the value of a company's stock, assuming that its dividends grow at a constant rate indefinitely.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend payments.

Market Value

The current price at which an asset or service can be bought or sold, determined by supply and demand in the marketplace.

Required Return

The minimum expected return by investors for providing capital to a particular investment, taking into account the risk level.