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NEW QUESTION: 1
A market strategist with Churn Brothers Brokerage is trying to determine the earnings multiplier of an equity index comprised of grocery stores, and has gathered the following information:
g: 6.00% per year
k: 8.50% per year
EPS: $3.35
D0: $1.20
Using this information, what is earnings multiplier for this equity index? Further, assuming that the grocery business is a mature industry, and that the economy is experiencing stable growth, is this earnings multiple realistic?
A. 15.67, this multiple is likely realistic
B. 14.33, this multiple is likely realistic
C. 130, this multiple is much too high
D. 4.21, this multiple is too low
E. None of these answers is correct.
F. 5.97, this multiple is too low
Answer: B
Explanation:
Explanation/Reference:
Explanation:
To determine the earnings multiplier, or "P/E ratio," of a stock market series, use the following equation: P/ E = [(D1 / E1) / (k-g) Where: D1 = the annual per-share dividend at t1, E1 = the EPS figure at t1, k = the required rate of return on common stock, and g = the expected growth rate of dividends.
In this example, all of the necessary information has been provided, and putting it into the equation above will yield the following:
P/E of a stock market series = [($1.20*1.06 / ($3.35*1.06)) / (0.085 - 0.06)] = 14.33 This earnings multiple is appropriate for lower growth industries, such as the grocery business, which has historically grown in the mid-to-high single digits for much of the last decade. Consider the fact that the P/E ratio is a proxy for future growth. Firms in the automobile, basic materials, or other mature industries, which are expected to grow slowly, are characterized by lower earnings multiples and higher dividend payout ratios. Firms in the software, networking, biotechnology, and other high-growth industries, are typically characterized by high earnings multiples and low dividend payout ratios. What is happening here is that investors are giving up current income (i.e. dividends) in the hopes of rapid earnings growth (i.e. greatly increased EPS in the future).
A complete understanding of this relationship is absolutely crucial, and as a Level 1 candidate, I encourage you to examine this relationship further if you are not completely comfortable with the P/E ratio, its components and the relationships between them, and the implications of the earnings multiplier across different industries. Indeed, the P/E ratio is a valuable tool, one which can provide significant information about the growth prospects priced into a common stock.
NEW QUESTION: 2
: 88
A penetration tester was able to enter an SQL injection command into a text box and gain access to the information store on the database. Which of the following is the BEST recommendation that would mitigate the vulnerability?
A. Implement input normalization
B. Install host-based intrusion detection
C. Randomize the credentials used to log in
D. Perform system hardening
Answer: D
NEW QUESTION: 3
Which of the following statements reflects the position of the Model Code on gambling or betting amongst market participants?
A. Gambling and betting amongst market participants should be strongly discouraged.
B. Gambling and betting amongst market participants may be permitted if management monitors it.
C. Gambling and betting amongst market participants should be prohibited.
D. Gambling and betting amongst market participants is only tolerated if it is previously reported to the CFP of the ACI.
Answer: A
NEW QUESTION: 4
Cartilage is categorized as which of the following types of connective tissue?
A. Dense.
B. Loose.
C. Fluid.
D. Supporting.
Answer: D