USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 61

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that the dividend payout ratio will be 55 percent when the rate on long-term government bonds falls to 9 percent. Because investors are becoming more risk averse, the equity risk premium will rise to 8 percent and investors will require a 7 percent return. The return on equity will be 13 percent.
-Refer to Exhibit 9.3. What is your expectation of the market P/E ratio?

• A) 37.69
• B) 24.92
• C) 58.15
• D) 55.02
• E) 47.82

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Definitions:

Unique Goods

Items that are distinct because of their rarity, craftsmanship, or specific characteristics making them irreplaceable.

Injunction

A court order either forcing a party to do something or prohibiting a party from doing something.

Digestive Problem

Health issues related to the digestive tract, which can include symptoms like stomach pain, bloating, and indigestion.

Creaky

Emitting or making a sharp, harsh, grating, or squeaking sound, often used to describe old or worn-out objects.