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The price-earnings ratio P/E is the ratio (market value of one share)/(earnings per share). If P/E increases by 17% and the earnings per share decrease by 8%, determine the percentage change in the market value. Round your answer to the nearest percentage point.

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hyderali230

Answer:

Share price = 8%

Explanation:

P/E ratio = (1+17%) = 1+0.17 = 1.17

Earning per share = (1-8%) = 1-0.8 = 0.92

P/E ratio = Share price / earning per share

1.17 = Share price / earning per share

Share price = 1.17 x earning per share

Share price = 1.17 x 0.92 = 1.0764

Change in share price = 1.0764 - 1 = 0.0764 = 7.64% = 8% (rounded off )

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