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You are using relative valuation to select equity investments. You have narrowed your selection down...

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Finance

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You are using relative valuation to select equity investments. You have narrowed your selection down to two firms and will only buy stock in one of the two firms if you invest. The two firms are fundamentally comparable in all aspects (same industry, same business model, etc) and have a required return of 10%. For firm A, you have calculated a price-to-earnings (P/E) ratio of 12. For firm B, you have calculated a P/E ratio of 14. aprice-to-earnings (P/E)ratie a required return of 10%,ForfirmAame How will you invest? same 0 Firm A because it has a low P/E Firm B because it has a high P/E 0 Firm B because its P/E ratio is more than 10% above that of Firm A Neither firm A or B because both have low P/E ratios Neither firm A or B because both have high P/E ratios n

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