1. An investor is reviewing data on Oracle, Inc stock. Oracle is in a high tech industry of computers and computer software development.

   It has a Price to Earnings (P/E) ratio of 25.

   The earnings per share (EPS) is $2.40. At a price of $60 a share, investors are willing to pay 25 times the EPS of $2.40.

   Why would an investor be willing to pay a price that is 25 times what a stock earns per share?

   	a.	Markets are forward looking. Investors are buying the expected future earnings of the firm.
   	b.	Investors just make mistakes sometimes and pay too much for a stock.
   	c.	Investors disregard the P/E ratio as it is based soley on speculation.
   	d.	Market actions are based on historical data and actions are for the present conditions of the firm.