1.) A)The P/E ratio of stock A is 25. The P/E ratio of stock B is 45....

60.1K

Verified Solution

Question

Finance

1.)
A)The P/E ratio of stock A is 25. The P/E ratio of stock B is45. Their expected returns are the same. Why is the P/E ratio ofstock B higher than that of stock A?
B) The P/E ratio of stock A is 25. The P/E ratio of stock B is45. Their expected growth rate is the same. Why is the P/E ratio ofstock B higher than that of stock A?

Answer & Explanation Solved by verified expert

4.4 Ratings (947 Votes)

PE ratio is generally used as an indicator of future prospects of the company PE ratio is the relation of market price of share as a multiple of the Earnings Per Share EPS A high PE ratio is an See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

1.)A)The P/E ratio of stock A is 25. The P/E ratio of stock B is45. Their expected returns are the same. Why is the P/E ratio ofstock B higher than that of stock A?B) The P/E ratio of stock A is 25. The P/E ratio of stock B is45. Their expected growth rate is the same. Why is the P/E ratio ofstock B higher than that of stock A?