medium · Principles of Finance
If a firm's retention ratio is 60 % and its required return on equity is 12 %, what is the justified forward price-to-earnings (P/E) multiple assuming a sustainable growth rate of 7 %?
- 8.0
- 12.0
- 2.11
- 8.56
Sign up free to see the explanation and track your rank →
More Principles of Finance practice
- Which loan has the higher effective annual rate (EAR)?
- Using the Capital Asset Pricing Model (CAPM), calculate the cost of equity for a firm with
- What is its current market price?
- What is the Multiple of Invested Capital (MOIC) for the equity investors?
- What is its Modified Duration?
- What is the Cash Flow from Operations (CFO)?
- What is the net profit per share for the investor?
- What is its Degree of Financial Leverage (DFL)?