Exhibit 9-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 107

Multiple Choice

Exhibit 9-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The Valentine Company currently has a 14% annual growth rate while the market average is 4%. The market multiple is 15.
-Refer to Exhibit 9-4. Determine the P/E ratio for the Valentine Company assuming Valentine can maintain its superior growth rate for the next 5 years.

• A) 23.7
• B) 16.4
• C) 15.3
• D) 8.3
• E) 3.8

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Definitions:

Competitive Buyer

A buyer in a market who cannot influence the market price and takes the price as given.

Marginal Expenditure

The rise in expense from obtaining one more unit of a good or service.

Average Expenditure

The total spending divided by the number of units bought, used to calculate the average cost of goods or services.

Rent Seeking

Spending money in socially unproductive efforts to acquire, maintain, or exercise monopoly.