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ABC Inc.'s comprehensive income was only slightly greater than zero last year because of the pandemic. Many investors expect ABC Inc.'s performance to remain poor
ABC Inc.'s comprehensive income was only slightly greater than zero last year because of the pandemic. Many investors expect ABC Inc.'s performance to remain poor this year. On the bright side, investors believe that the bad performance is only temporary, and ABC Inc. will be back to its normal track in two years. However, investors are pessimistic about the firm's long- term future and expect that ABC Inc.'s long-term returns on common equity will be very close to its cost of equity of 9%. Judging solely from the information given, which of the following pricing multiples are most likely to be observed? P/B = 0.28, Forward P/E = 8.25, Trailing P/E = 15.88 P/B = 0.32, Forward P/E = 9.98, Trailing P/E = 12.04 P/B = 0.96, Forward P/E = 25.05, Trailing P/E = 27.16 = = P/B = 1.04, Forward P/E = 11.25, Trailing P/E = 12.92 = P/B = 3.58, Forward P/E = 20.13, Trailing P/E = 24.75 = = Which one of the following statements is CORRECT? All else equal, higher financial leverage increases a firm's return on net operating assets. All else equal, higher financial leverage increases a firm's return on common equity. All else equal, higher operating liability leverage increases a firm's return on net operating assets. O All else equal, higher operating liability leverage increases a firm's return on common equity. None of the above statements is correct
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