A price-earnings ratio or P/E ratio is calculated as a firm\'s share price compa

Question

A price-earnings ratio or P/E ratio is calculated as a firm's share price compared to the income or profit earned by the firm per share. Generally, a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E ratio. The following table shows the P/E ratios for a sample of firms in the footwear industry: Use Table 2 P/E Ratio Firm Brown Show Co., Inc CROCS, Inc DSW, Inc. Foot Locker, Inc. Nike, Inc 26 13 21 16 21 SOURCE: http://biz.yahoo.com, data retrieved September 2, 2012. Let these ratios represent a random sample drawn from a normally distributed population. Construct the 90% confidence interval for the mean P/E ratio for the entire footwear industry. (Round intermediate calculations to 4 decimal places. Round "f" value to 3 decimal places and final answers to 1 decimal place.) to Confidence interval

Explanation / Answer

The statistical software output for this problem is:

One sample T confidence interval:
: Mean of variable

90% confidence interval results:

Hence,

90% confidence interval is from 14.6 to 24.2

Variable Sample Mean Std. Err. DF L. Limit U. Limit p/E Ratio 19.4 2.2494444 4 14.604529 24.195471

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