Hi-Ret Corp. which has a return on equity of 24% has a price/book value ratio of 3.0. The return on equity is expected to drop to 12%. Which of the following is most likely to happen to the price/book value ratio, and why?

A. The price/book value ratio will not change.

B. The price/book value ratio will increase by 50%.

C. The price/book value ratio will increase by more than 50%.

D. The price/book value ratio will drop by half to 1.50.

E. The price/book value ratio will drop by more than half.

F. None of the above.