Which of the following is most likely to result in a higher P/E ratio for a firm,other things equal?
A) Lower growth rate in dividends
B) Reduction in the stock's required rate of return
C) Lower dividend yield
D) Lower stock price

Question

Quizplus · Accepted Answer

A reduction in the stock's required rate of return decreases the denominator in the P/E ratio formula, leading to a higher P/E ratio, assuming earnings remain constant.

Which of the Following Is Most Likely to Result in a Higher