Asked by Lavkush Tamrakar on Jul 30, 2024
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A firm's earnings per share increased from $10 to $12, its dividends increased from $4 to $4.40, and its share price increased from $80 to $100. Given this information, it follows that ________.
A) the stock experienced a drop in its P/E ratio
B) the company had a decrease in its dividend payout ratio
C) both earnings and share price increased by 20%
D) the required rate of return increased
P/E Ratio
The price-to-earnings ratio, a valuation metric that compares the current share price of a company to its per-share earnings, used to evaluate if a stock is over or undervalued.
Dividend Payout Ratio
A financial metric that measures the percentage of a company's earnings paid out to shareholders as dividends.
Earnings Per Share
Earnings per share (EPS) is a company's profit divided by the outstanding shares of its common stock, indicating the company's profitability on a per-share basis.
- Measure and discuss the implications of Price-Earnings (P/E) ratios and their correlation with various influences.
- Explore the relationship between growth rates, dividends, and their effect on the valuation of stock.
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Learning Objectives
- Measure and discuss the implications of Price-Earnings (P/E) ratios and their correlation with various influences.
- Explore the relationship between growth rates, dividends, and their effect on the valuation of stock.
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