1.The P/E ratio for the S&P 500 is 28.8. Assume this is the P/E ratio for the market overall.

Use that information to determine which of the following statements is INCORRECT.

a.Cloroxs P/E ratio is slightly lower than the market overallb.PayPals P/E ratio is 120.1, which indicates that the market projects much HIGHER earnings growth for this company than the market overall

b.PayPals P/E ratio is 120.1, which indicates that the market projects much HIGHER earnings growth for this company than the market overall

c.Netflixs P/E ratio indicates that the market projects HIGHER earnings growth for this company than PayPal

d.A stocks P/E ratio is just one indicator that an investor should consider

PayPals P/E ratio indicates that the market projects HIGHER earnings growth for this company than Clorox

2.Which of the following statements is INCORRECT?

a.Cloroxs market value is $26.3 billion

b.Netflix has the highest stock price but NOT the highest M/B ratio

c.PayPal has the lowest stock price and the highest market value of the three companies

d.PayPal has lowest market-to-book value

e.Cloroxs market-to-book ratio is LOWER than Netflixs

3.Cloroxs stock prices from October 1, 2010, to October 1, 2020, are shown below.

Oct. 1	Stock Price
2020	$209.22
2019	$144.80
2018	$141.29
2017	$117.11
2016	$108.27
2015	$107.35
2014	$89.27
2013	$74.77
2012	$58.04
2011	$51.90
2010	$49.93

3.What is the average compound annual growth rate of the stock over the 10 years from 2010 to 2020?

PayPal and Netflix

The revenue and net income for PayPal and Netflix for 2020 (trailing 12 months through June 30) and 2019 are shown below.

Company | Stock Symbol	Financial Indicator	2020	2019
PayPal | PYPL	Revenue ($M)	$18,262	$17,772
	Net Income ($M)	$1,876	$2,459
Netflix |NFLX	Revenue ($M)	$22,628	$20,156
	Net Income ($M)	$2,681	$1,867

4.Using the PayPal and Netflix data above, calculate profit margins for each company for 2020 and 2019. Which of the following statements is INCORRECT?

a.PayPals profit margin is higher in 2020 than in 2019

b.PayPals profit margin is 10.3% in 2020

c.Netflixs profit margin is higher in 2020 than in 2019

d.Netflixs profit margin is 11.8% in 2020

e.PayPal had a higher profit margin than Netflix in 2019

5.Using the PayPal and Netflix data above, calculate the year-over-year changes in revenue and net income for each. Which of the following statements is INCORRECT?

a.PayPals revenue increased 2.8% year-over year, but its profit decreased 23.7%

b.Year-over-year both Netflixs revenue and net income increased

c.Year-over-year Netflixs revenue increased 24%

d.Year-over-year, Netflixs profit increased 43.6%, a much higher rate of increase than its revenue

Netflix showed stronger year-over-year performance than PayPal for both revenue and profit

P/E and M/B Ratios. Some companies have fared well during the pandemic because they sell goods and services that people need. Three of these companies are Clorox, PayPal and Netflix. As of Oct 2, 2020, these companies had the following stock prices, net income, shares outstanding and common equity. In the next two problems, you'll use this information to calculate the Price-to- Earnings and Market-to-Book-Value ratios for these companies. Stock Price Company ($ per share, Oct. 1) Net Income ($M) Shares Outstanding (millions) Common Equity ($M) Clorox $209.22 $939 125.93 $908 PayPal $191.91 $1,876 1174.00 $17,640 Netflix $503.06 $2,681 437.80 $9,335 The P/E ratio for the S&P 500 is 28.8. Source: finance.yahoo.com and multpl.com/s-p-500-pe-ratio