CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

Companies with higher expected growth opportunities usually sell for ______.

A. lower P/E ratio
B. higher P/E ratio
C. a price that is independent of the P/E ratio
Correct Answer: B

User Contributed Comments 6

User Comment
sarath Higher growth means higher "g" so lower denominator and higher P/E ratio.
francesca higher expected growth opportunities doesn't imply a higher retention rate also? therefore a lower numerator?
mrushdi Higher the growth rate, people are willing to pay more for a $1 of EPS.
thekobe higher retention rate, so a lower dividend rate
khalifa92 anything deducted; growth and payout ratio, from the denominator, increases P/E.
MathLoser You guys are making simple problem becomes complicated.
This is common sense, don't waste your time investigating the formula.
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