Mark the only incorrect statement about valuation: a. EV/EBIT is more meaningful than P/E ratio when...

Mark the only incorrect statement about valuation:

	a.	EV/EBIT is more meaningful than P/E ratio when firms have very different leverage ratios
	b.	Market-to-Book Ratio is used to compare stocks with growth or low growth potential
	c.	The P/E ratio of any company that is fairly priced will equal its growth rate
	d.	Two stocks with the same EPS growth (g) and equivalent equity cost of capital don’t have the same P/E ratios

Solutions

Expert Solution

Market to book value will be compared in order to find out the valuation of the company in market in respect of its intrinsic valuation so it is not about finding out the low growth or the high growth company.

The given statement about market to book ratio is incorrect.

Correct answer will be option (B)market to book ratio is used to compare stocks with growth or low growth potential.

jeff jeffy answered 2 years ago

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