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The following table provides you with information about two companies - NewSoft Inc. and Capital Corp. NewSoft Inc. Current Price $30 Industry Computer Software P/E
The following table provides you with information about two companies - NewSoft Inc. and Capital Corp. NewSoft Inc. Current Price $30 Industry Computer Software P/E ratio (current) P/E ratio (5-year average) 27 Capital Corp. $32 Heavy Machinery 25 14 16 In general, the firm with a high P/E ratio suggests it might be overvalued. But, there could be another interpretation of a high P/E ratio. Newsoft's shares have a higher P/E ratio than that of Capital Corp. Briefly discuss why the disparity in the P/E ratio may not indicate that NewSoft's shares are overvalued relative to Capital Corp. O A. NewSoft has higher expected growth rate of earnings and dividends than Capital Corp. B. The shares of New Soft are more volatile (i.e. riskier) than Capital Corp. C. NewSoft is in an industry with more profitable projects and more growth opportunities than Capital Corp. D. Both (A) and (C) are the possible reasons
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