ART Has Come Out with a New and Improved Product

question 38

Multiple Choice

ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3 per share. Investors expect a 12% rate of return on the stock.
At what P/E ratio would you expect ART to sell?

• A) 8.33
• B) 11.43
• C) 14.29
• D) 15.25

---

Definitions:

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Water Resource Economists

Specialists who analyze the use, management, and conservation of water resources through the lens of economic theories and models.

Specific Places

This term doesn't align directly with a specific economic concept; it could relate to locations significant for economic activities or market transactions.

Transferability

Transferability refers to the ease with which skills, knowledge, or assets can be moved or used in different contexts or jobs.