What is the P/E ratio is determined by?
A) The required rate of return.
B) The expected dividend payout ratio.
C) The expected growth rate of dividends.
D) Choices a and b
E) All of the above.

Question

Quizplus · Accepted Answer

The P/E ratio is determined by all of the above factors: the required rate of return, the expected dividend payout ratio, and the expected growth rate of dividends. The required rate of return represents the minimum return investors expect to receive on their investment. The expected dividend payout ratio is the percentage of the company's earnings that are paid out to shareholders as dividends. The expected growth rate of dividends reflects the expected rate of growth in the company's earnings and dividends over time. All three factors play a role in determining a company's P/E ratio.

What Is the P/E Ratio Is Determined By