Describe how an investor would use the PE ratio model to calculate the value of a...

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Finance

Describe how an investor would use the PE ratio model tocalculate the value of a share of stock. Please be specific.Discuss the problems involved in using the PE model to valuestocks

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PE ratio refers to a ratio which states that how much times the company is valued as per its earnings In other words it can also be said that within how much times the earnings from the company will help the investor in recovering the investment Formula for PE ratio is as follows PE ratio Market Price Per ShareEarnings Per Share Now following this above formula an investor can compute the fair price of stock as per the earnings per share reported by the company Such expression will be as follows PE ratioEarnings Per Share Market Price Per Share Thus using the See Answer

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Describe how an investor would use the PE ratio model to calculate the value of a...

70.2K

Verified Solution

Question

Finance

Describe how an investor would use the PE ratio model tocalculate the value of a share of stock. Please be specific.Discuss the problems involved in using the PE model to valuestocks

Answer & Explanation Solved by verified expert

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