Assume that a firm distributes all of its earnings as dividends Which

Question

Assume that a firm distributes all of its earnings as dividends. Which of the following is indicated by a price-earnings (P/E) ratio of 10?

a. It would take 10 years for an investor to recover his or her initial investment.

b. The firm will pay a dividend of $10 per share.

c. The value of the stock will be 10 times the initial investment at the time of maturity.

d. The stock's value will increase by 10 percent every year.

e. An investor would receive 10 percent of the total earnings of the firm at the time of liquidation.

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