alleryStart learning →The inverse of the P/E ratio, the E/P rate, is implicitly treated as the
Adividend payout rate
Bexpected growth rate
Ceffective tax rate
Drisk-based discount rate
Answer & Solution
Correct answer: D. risk-based discount rate
Viewing earnings as a perpetual annuity implies that E/P is the discount rate suited to the business risk.
Keep practising Security Analysis
Browse all Security Analysis questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
Investment strategies such as momentum trading seek to exploitThe Fama-French 3 factor model includes a size factor calledSmall neglected stocks and value stocks earning abnormally high returns are examples ofBehavioral economists attribute market imperfections toWho argued in 1945 that markets are the most effective way of aggregating dispersed informWhich French mathematician's 1900 thesis The Theory of Speculation anticipated market effiThe problem that market efficiency can never be tested without also testing a risk model iIf markets are only weak-form efficient, which method is useless for abnormal profits?