Below are sample P/E ratios of three fast food companies on August 1, 2016: 

McDonald’s, The Wendy’s Company, and Yum! Brands (which owns KFC, Pizza Hut, and Taco Bell).

Company      P/E Ratio

McDonald's     22.0

Wendy's           20.7

Yum!                 27.4

Which of the following is a possible explanation for the differences in P/E ratios?

The market believes that Yum! Brands has more growth opportunities than Wendy’s or McDonald’s

McDonald’s has a higher discount rate than Wendy’s Wendy’s has a lower discount rate than Yum! Brands

McDonald’s has higher earnings than either Yum! Brands or Wendy’s

Answer rating: 100% (QA)

The detailed answer for the above question is provided below Answer Option a i If we assume earn... View the full answer