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Compute the price-earnings ratio

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Reference no: EM133114642

Question -

a. Compute the price-earnings ratio under the following sets of assumptions:

Scenario

Cost of Equity Capital

Growth Rate in Earnings

P/E Ratio

1

0.13

0.09

2

0.13

0.11

3

0.15

0.09

4

0.18

0.09

5

0.18

0.11

b. Assess the sensitivity of the price-earnings ratio to changes in the cost of equity capital and changes in the growth rate.

Reference no: EM133114642

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