Microsoft Word - hw2_2017_bpes[3].docx

Explain why the following statements are true/false/uncertain:

1. 1.Holding all else constant, a firm will have a higher P/E if its beta is higher.
2. 2.P/E will tend to be higher when ROE is higher (assuming plowback is positive).
3. 3.P/E will tend to be higher when the plowback ratio is higher.