Exhibit 9-3 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 92

Multiple Choice

Exhibit 9-3
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Harcourt Industries currently has an 18% annual growth rate while the market average is 8%. The market multiple is 12.
-Refer to Exhibit 9-3. Determine the justified P/E ratio for Harcourt Industries assuming Harcourt can maintain its superior growth rate for the next 9 years.

• A) 5.98
• B) 13.13
• C) 21.20
• D) 58.68
• E) 26.65

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Definitions:

Break-Even Calculations

The process of determining the point at which revenues equal expenses, indicating that no net loss or gain has been realized.

Common Fixed Expenses

Overhead costs that do not vary with the level of production or sales, shared by multiple business units or products.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.

Ending Inventory

The total value of all goods available for sale at the end of an accounting period, not yet sold.