Alpha Corporation Has a Price of $5 a Share,outstanding Shares

question 117

Multiple Choice

Alpha Corporation has a price of $5 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 2 percent.It has a price-earnings ratio which is

• A)high,perhaps indicating that people expect future earnings to rise.
• B)high,perhaps indicating that people expect future earnings to fall.
• C)low,perhaps indicating that people expect future earnings to rise.
• D)low,perhaps indicating that people expect future earnings to fall.

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Definitions:

Ford

An American multinational automaker founded by Henry Ford, known for mass-producing affordable vehicles and pioneering assembly line production techniques.

General Motors

An American multinational corporation headquartered in Detroit that designs, manufactures, markets, and distributes vehicles and vehicle parts.

Greenmail

A situation where a company pays a premium to buy back its own stock from a shareholder to avert a takeover attempt.

Takeover Attempt

An effort by one company to acquire control of another company, often through the purchase of a majority of its stock.