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Which of the following might cause a firm's P/E ratio to fall? I

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1. Which of the following might cause a firm's P/E ratio to fall?
   I. Earnings increases in line with past expectations.
   II. The industry faces increased competition.
   III. Inflation and interest rates rise.
   IV. The overall market multiple rises.
   A) I, II and III only
   B) I, II and IV only
   C) I, III and IV only
   D) I, II, III and IV
2. Which of the following contributes to high P/E ratios?
   A) high dividend payout ratios
   B) high rate of earnings growth
   C) periods of high inflation
   D) high debt ratios
3. High P/E ratios can be expected when investors expect
   A) a high rate of growth in earnings.
   B) low earnings. relative to market prices.
   C) high interest rates.
   D) a bear market.
4. Which of the following will most directly influence a company's market value?
   A) the state of the economy
   B) the book value of its assets
   C) the use of financial leverage
   D) its future cash flows
5. A relative P/E ratio greater than 1 indicates that a company may be undervalued.
6. If net income rises, but the number of shares outstanding remains the same, EPS will rise.
7. The common-size income statement expresses every item on the income statement as a percentage of sales.
8. A temporary decline in earnings per share usually results in a temporary reduction of dividends.
9. A decline in earnings that investors expect to be temporary may actually increase a firm's P/E ratio.
10. The Merry Co. has current annual sales of $350,000 and a net profit margin of 6%. Sales are expected to increase by 5% annually while the profit margin is expected to remain constant. What is the projected after-tax earnings for two years from now?
    A) $19,294
    B) $22,050
    C) $23,100
    D) $23,153