The following table shows the Price-to-Earnings ratio for a Stereo equipment man

Question

The following table shows the Price-to-Earnings ratio for a Stereo equipment manufacturing company between 1998 and 2002. The annual percentage growth rate of the P/E ratios are also calculated and given below:

Year

P/E Ratio

Growth rate %

1998

12.4

1999

14.6

17.74% (1998-1999)

2000

11.1

-23.97% (1999-2000)

2001

8.2

-26.13% (2000-2001)

2002

6.8

-17.07% (2001-2002)

Calculate the geometric mean growth rate increase or decrease over the period from 1998 to 2002.

Please show ALL work

Year

P/E Ratio

Growth rate %

1998

12.4

1999

14.6

17.74% (1998-1999)

2000

11.1

-23.97% (1999-2000)

2001

8.2

-26.13% (2000-2001)

2002

6.8

-17.07% (2001-2002)

Explanation / Answer

G=(PEN/PE0)1/g -1

6.8=12.4(1+g)4

G=(6.8/12.4)1/4-1 = -13.9%

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.