Which of the following statements is correct? With all else held constant, a firm will have a higher P/E if its market capitalization rate is higher. P/E will tend to be higher when ROE is higher (assuming plowback is positive). P/E will tend to be higher when the plowback rate is higher.

Which of the following statements is correct? With all else held constant, a firm will have a higher P/E if its market capitalization rate is higher. P/E will tend to be higher when ROE is higher (assuming plowback is positive). P/E will tend to be higher when the plowback rate is higher.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 12QTD

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Question

Which of the following statements is correct?

With all else held constant, a firm will have a higher P/E if its market capitalization rate is higher.
	P/E will tend to be higher when ROE is higher (assuming plowback is positive).
	P/E will tend to be higher when the plowback rate is higher.

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