Question

A price-earnings ratio or P/E ratio is calculated as a firm’s share price compared to the income or profit earned by the firm per share. Generally, a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E ratio. The following table shows the P/E ratios for a sample of firms in the footwear industry:

Firm P/E Ratio
Brown Shoe Co., Inc....... 26
CROCS, Inc. ........... 13
DSW, Inc. ........... 21
Foot Locker, Inc. ............ 16
Nike, Inc. ........... 21

Let these ratios represent a random sample drawn from a normally distributed population. Construct the 90% confidence interval for the mean P/E ratio for the entire footwearindustry.


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  • CreatedJanuary 28, 2015
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