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Questions and Answers
What does the PEG ratio capture?
What does the PEG ratio capture?
- The relationship between earnings growth and P/E ratio (correct)
- The relationship between earnings growth and EV
- The relationship between earnings growth and retention ratio
- The relationship between earnings growth and enterprise value multiples
How is the PEG ratio interpreted?
How is the PEG ratio interpreted?
- Price per unit of expected earnings
- Retained earnings per unit of expected growth
- P/E per unit of expected risk
- P/E per unit of expected growth (correct)
What advantage does the PEG ratio offer in valuation?
What advantage does the PEG ratio offer in valuation?
- It standardizes the P/E ratio for stocks with different expected growth rates (correct)
- It standardizes the P/E ratio for stocks with different risk profiles
- It compares risk across different industries
- It accounts for the duration of high-growth periods in multistage valuation models
Why can comparisons using the PEG ratio be difficult?
Why can comparisons using the PEG ratio be difficult?
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When are enterprise value multiples considered more appropriate to use?
When are enterprise value multiples considered more appropriate to use?
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What is the most commonly used enterprise value multiple?
What is the most commonly used enterprise value multiple?
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What does the EV/EBITDA multiple measure?
What does the EV/EBITDA multiple measure?
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Which component is included in the calculation of enterprise value (EV)?
Which component is included in the calculation of enterprise value (EV)?
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What is EBITDA calculated as?
What is EBITDA calculated as?
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Which enterprise value multiple is recommended for capital-intensive industries?
Which enterprise value multiple is recommended for capital-intensive industries?
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