Company A has a P E ratio of 12 4 while company B has a P E ratio of 38 6 Both companies reported that this quarter's earnings per share was 50 cents more than projected According to the Gordon formula, company A has a lower expected growth rate than company B and company A's stock price should change more than that of company B's company A has a lower expected growth rate than company B and company A's stock price should change less than that of company B's company A has a higher expected growth rate than company B and company A's stock price should change less than that of company B's company A has a higher expected growth rate than company B and company A's stock price should change more than that of company B's whats the correct answer and why

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 06, 2024

Company A has a P/E ratio of 12.4 while company B has a P/E ratio of 38.6. Both companies reported that this quarter's earnings per

Company A has a P/E ratio of 12.4 while company B has a P/E ratio of 38.6. Both companies reported that this quarter's earnings per share was 50 cents more than projected. According to the Gordon formula,

		company A has a lower expected growth rate than company B and company A's stock price should change more than that of company B's.
		company A has a lower expected growth rate than company B and company A's stock price should change less than that of company B's.
		company A has a higher expected growth rate than company B and company A's stock price should change less than that of company B's.
		company A has a higher expected growth rate than company B and company A's stock price should change more than that of company B's. whats the correct answer and why?