Question

Which of the following valuation methods tends to value stocks more highly than the others in...

Which of the following valuation methods tends to value stocks more highly than the others in the list because it considers expected earnings?

A) liquidation value

B) book value

C) P/E multiple

D) present value of the interest

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Answer #1

When we are valuing the common stock,then price to earning multiple will be considered superior to use of book value or liquidation values or present value of the interest because it will be considering the expected earnings.

Price to earning multiple will be valuing the stocks more highly than others because it will be considering the texpected earning in the future of these stocks and this will be giving the stock higher valuation because other valuation model like book value and liquidation value and present value of interest will not be providing with higher valuations.

Correct answer will be option( C) P/E Multiple

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