Asked by Sayyam Tariq on Jul 25, 2024
Verified
If two stocks have the same earnings per share and required rate of return, differences in the ____________ of the two companies can account for different stock prices.
A) Voting rights.
B) Growth opportunities.
C) Number of shares outstanding.
D) Number of directors.
E) Value of preferred stock.
Growth Opportunities
Potential scenarios or projects that might result in an increase of value or expansion for a business.
Earnings Per Share
A financial metric that divides a company's profit available to shareholders by the outstanding shares, indicating the profitability on a per-share basis.
Required Rate Of Return
The minimum annual percentage of gain an investment must generate to be considered acceptable to an investor.
- Determine the elements influencing stock prices, such as market rate of return and dividend growth rate.
Verified Answer
CN
Charlie NguyenJul 26, 2024
Final Answer :
B
Explanation :
Growth opportunities can significantly impact a company's future earnings and cash flows, which in turn affect its stock price. Stocks with higher growth prospects are typically valued higher than those with lower growth prospects, even if their current earnings per share and required rates of return are the same.
Learning Objectives
- Determine the elements influencing stock prices, such as market rate of return and dividend growth rate.