USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 98

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
As an economist for a research firm, you are forecasting the market P/E ratio using the dividend discount model. Because the economy has been slow for 5 years, you expect the dividend-payout ratio to be 55 percent. Long-term government bond rates are at 6 percent, and the equity risk premium is estimated to be 3 percent. Return on equity (ROE) is estimated to be 11 percent.
-Refer to Exhibit 9.8. What is your expectation of the market P/E ratio?

• A) 9.17
• B) 11.11
• C) 13.58
• D) 18.33
• E) 21.42

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Definitions:

Death

The end of life, characterized by the cessation of vital functions or processes.

Demographers

Experts who study population dynamics, including birth rates, death rates, aging, and migration, to understand how populations change over time.

Older Population

Refers to individuals in a society who are considered elderly, often defined as those 65 years of age and older, with specific needs and challenges.

Aged 65

Refers to individuals who have reached the age of 65 years, often considered the beginning of old age or retirement age in many societies.