A junior analyst is computing the P/E ratio of ABC stock. The return on equity (ROE) is 13%. The analyst expects earnings per share next year to be $1.80. CAPM predicts the required rate of return on the stock to be 12%. If the firm's plowback ratio is 25%, find the earnings multiplier (P/E ratio).

Answer rating: 100% (QA)

The PE ratio can be calculated using the Gordon growth ... View the full answer