P/E ratios reported in The Wall Street Journal use the latest closing prices and the last 12

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P/E ratios reported in The Wall Street Journal use the latest closing prices and the last 12 months’ reported earnings per share. Explain why the corresponding earnings–price ratios (the reciprocals of reported P/Es) are not accurate measures of the expected rates of return demanded by investors.

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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