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Question) Firm A has a very high reinvestment 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 reinvestment 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 would have the same P/E if they had the same risk
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