a ng.cengage.com MindTap-Cengage Learning Case: What is Stock ? Po.. 5% MINDTAP

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a ng.cengage.com MindTap-Cengage Learning Case: What is Stock ? Po.. 5% MINDTAP From Cengage Ch 07: Assignment- Common Stock: Characteristics, Valuation, and Issuance Attempts: Average: /1 1. Stock market reporting Aa Aa Common stock is considered to be a variable-income security since the earnings from a common stock investment depend on the dividends that the company pays and the potential appreciation of the price of the stock itself. Company stock information (such as dividends, price changes, and so on) is available from several publicly accessible resources. The following table lists stock price data for four companies held in a mutual fund's portfolio: YTD 52-WEEK STOCK YLDVOL NET DIV 90 PE 100s LAST CHG +11.5 29.79 25.00 Green Sun Company 1.50 5.34001 28.47 +0.08 +15.9 55.55 40.04 Purple Tiger Tech 2.00 4.9 5 34201 41.10 -0.15 % CHG HI LO 40.20 30.03 Saltwater Logistics 1.20 3.2 17 2033 37.67 +0.17 +6.9 38.60 23.17 Beatnik Designs 0.50 1.4 15 15770 34.87 -0.28 Use the preceding data to answer the following question Of the three companies that list price-to-eamings (P/E) ratios, Purple Tiger Tech has the lowest P/E ratio. What can you hypothesize from this? Investors expect Purple Tigers earnings to grow more slowly than the other companies' earnings. O Purple Tiger's stock is definitely overvalued. O Speculators are purchasing stock hoping that Purple Tiger's stock price will rise to unreasonably high levels. Save& Continue

Explanation / Answer

Investors expect Purple Tiger's earnings to grow more slowly than the other companies' earnings

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