Which of the following statements is true?
A) The greater the use of debt, the higher the P/E ratio of a firm will be.
B) Debt has no effect on the P/E ratio of a firm.
C) Debt has an effect on the P/E ratio of a firm, but it may cause either an increase or a decrease in the ratio, depending on whether or not the firm is a growth firm.
D) The greater the use of debt, the lower the P/E ratio of a firm will be.
Correct Answer:
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