Stock market analysts devote considerable attention to a companys price-to-earnings ratio. The P/E ratio reflects the markets

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Stock market analysts devote considerable attention to a company’s price-to-earnings ratio.

The P/E ratio reflects the market’s assessment of the firm’s growth opportunities. Firms with no growth opportunities should have a P/E ratio that is the reciprocal of the capitalization rate, k.

As growth opportunities become a progressively more important component of the total value of the firm, the P/E ratio will increase. P-69

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ISE Investments

ISBN: 9781266085963

13th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

Question Posted: Jul 31, 2024 04:01 AM

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Stock market analysts devote considerable attention to a companys price-to-earnings ratio. The P/E ratio reflects the markets

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ISE Investments

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