The Franchise P/E Is a Function of

question 117

Multiple Choice

The franchise P/E is a function of

• A) Relative rate of return on new business opportunities
• B) Size of superior return opportunities.
• C) Duration of earnings growth.
• D) Choices a and b.
• E) Choices a, b, and c.

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Definitions:

Efficient Markets Hypothesis

A theory that suggests that financial markets are “informationally efficient,” meaning that asset prices always reflect all available information.

Actual Capital Markets

Real-world financial markets where savings and investments are transferred between suppliers who have capital and those who are in need of capital.

Statistical Measure

A quantitative representation that describes a characteristic of a data set or population, such as mean or standard deviation.

Pop-off Valve

A safety device designed to release excess pressure from a system, such as an air tank or steam boiler, to prevent over-pressurization and potential damage.