What two factors are probably most important in influencing the P/E ratio for an individual stock? Suggest a number of other factors as well.
Answer to relevant QuestionsWhat type of industries tend to carry the highest P/E ratios? Based on the sustainable growth model, if a firm increases the dividend payout ratio (1 – the retention ratio), will this increase or decrease the growth in earnings per share in the future? Rework problem 11 with a new assumption—that dividends at the end of the first year are $1.60 and that they will grow at 18 percent per year until the end of the fifth year, at which point they will grow at 6 percent per ...If RF = 6 percent, b = 1.3, and the ERP = 6.5 percent, compute Ke (the required rate of return). Why will the fixed-charge-coverage ratio always be equal to or less than times interest earned?
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