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All else the same, a higher plowback ratio means a/an ______ P/E ratio (a) higher (b)...

All else the same, a higher plowback ratio means a/an ______ P/E ratio


(a) higher
(b) lower
(c) unchanged
(d) unable to determine

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Answer #1

The Answer of the above is Higher.

Because to bring out the retention ratio of the company is higher due to earn more and more. If the earning of the company is higher then the Retention ratio of the company is higher. So Plow back ratio is totally depend on the Price/ Earning Ratio.If the expected rate of return on the firm's projects is higher than the market capitalization rate, then P/E will increase as theplowback ratio increases.

So, Plow back ratio is totally depend on Price earning ratio.

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