Price/earnings ratios are ____ for firms with ____ expected earnings and ____ expected required rates of return.

Question

Quizplus · Accepted Answer

Price/earnings (P/E) ratios are higher for firms with higher expected earnings because investors are willing to pay more for each dollar of earnings due to the anticipation of growth. P/E ratios are also higher when the expected required rates of return are lower because investors are willing to accept a lower return for each dollar invested, often due to lower risk or fewer alternative investment opportunities with high returns.

Price/earnings Ratios Are ____ for Firms with ____ Expected Earnings

Price/earnings Ratios Are for Firms with Expected Earnings