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Q#3(Chapter 7). You learned that stocks could also be valued using the P/E ratio multiple...

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Finance

Q#3(Chapter 7). You learned that stocks could also be valued using the P/E ratio multiple method. (a) What are the main drawbacks of P/E multiple approach compared to constant dividend/cash flow models in valuing stocks? (b) If a firm's future earnings growth rate falls and its required return on equity (rs) rises due to Coronovirus effects, then what will happen to the firm's P/E ratio?

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