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Question) Firm A has a very high investment ratio (i.e. high plowback ratio). And Firm B has very low reinvestment ratio (i.e. low plowback ratio).
Question) Firm A has a very high investment ratio (i.e. high plowback ratio). And Firm B has very low reinvestment ratio (i.e. low plowback ratio). All else being equal, which firm would you expect to have a higher P/E ratio? a) Firm a b) The reinvestment ratio does not affect the P/E ratio c) Firm B d) Both should have the same P/E if the had the same risk
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