Asked by Nataly Cabrera on Jul 02, 2024
Risky firms have a higher risk-adjusted cost of capital.Which one of the following factors would contribute to that firm also having a high price/earnings ratio?
A) High earnings per share
B) Low earnings per share
C) Growth opportunities
D) High risk and high P/E ratio cannot occur simultaneously.
Price/Earnings Ratio
A valuation metric for a company that measures its current share price relative to its per-share earnings.
Growth Opportunities
Potential scenarios or plans that a company can undertake to increase its market share, revenues, or profitability.
- Analyze the factors affecting a firm's price/earnings ratio and the implications of risk-adjusted cost of capital.
Learning Objectives
- Analyze the factors affecting a firm's price/earnings ratio and the implications of risk-adjusted cost of capital.
Related questions
According to the Abnormal Earnings Approach of Equity Valuation,investors Willingly ...
Which of the Following Statements Best Describes Capital Structure ...
If the Times Interest Earned Ratio ...
The Cost of Capital,expressed in Dollars,reflects the Level of Earnings ...
Lenders Compare Their Cash Flow Projections for a Company to ...