Consider the following scenario and complete the last column and then Assess the sensitivity of the price-earnings ratio to changes in the cost of equity capital and changes in the growth rate:   Table 9 Estimating price earning(P/E) ratios under various scenarios 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

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
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Consider the following scenario and complete the last column and then Assess the sensitivity of the price-earnings ratio to changes in the cost of equity capital and changes in the growth rate:

 

Table 9

Estimating price earning(P/E) ratios under various scenarios

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

 
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