Which of the following is NOT true? Knowing that the share price = P/E x EPS; If EPS grows by 24% because shares are bought back, and debt increases

Question

Accepted Answer

Then the share price will automatically grow at the same pace

Answer

It is highly probable that the cost of equity will rise as the shareholders’ risk increases. This will lead to a lower P/E and therefore the increase in share price will be more modest than the increase in EPS

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Answer

then the growth in share price will depend also on the change in P/E

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Which of the following is NOT true? Knowing that the share price = P/E x EPS; If...

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