Price-earnings (P/E)ratios can be estimated using which of the following?
I.The required rate of return
II.The expected growth rate of dividends
III.The retention ratio

Question

Quizplus · Accepted Answer

Price-earnings (P/E) ratios can be estimated using the required rate of return, the expected growth rate of dividends, and the retention ratio. The required rate of return affects the discount rate applied to future earnings or dividends, influencing the P/E ratio. The expected growth rate of dividends impacts future earnings projections, thus affecting the P/E ratio. The retention ratio, which indicates the proportion of earnings not paid out as dividends, affects the amount of earnings reinvested in the company, potentially influencing future growth and thereby the P/E ratio.

Price-Earnings (P/E)ratios Can Be Estimated Using Which of the Following