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Which of the following is the best reason why the price-earnings method is often used by investors to estimate the fair price of a stock?
Which of the following is the best reason why the price-earnings method is often used by investors to estimate the fair price of a stock?
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a) Because the earning multiples are easily found in online financial databases.
b) Earnings per share is a known amount that is related to the payment of future dividends.
c) Because the price-earnings method gives the same answer as the constant growth method and is easier to compute.
d) The price-earnings method has been shown to provide the most accurate price estimate.
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