USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 2

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The Valentine Company currently has a 14 percent annual growth rate, while the market average is 4 percent. The market multiple is 15.
-Refer to Exhibit 9.13. Determine the justified P/E ratio for the Valentine Company assuming Valentine can maintain its superior growth rate for the next 10 years.

• A) 3.0
• B) 9.2
• C) 16.6
• D) 28.6
• E) 37.6

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Definitions:

Positive Economics

The branch of economics that concerns itself with describing and explaining economic phenomena as they are, not as they should be.

Normative Economics

An area of economics that analyzes outcomes based on value judgments about what is desirable or what ought to be, rather than what merely is.

Supply and Demand

Fundamental economic concepts that describe how the availability of products (supply) and the desire for them (demand) determine prices.

Scarce

Describes resources or goods that are limited in availability and cannot satisfy all the wants and needs of consumers.