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Question

If the same company's stock price fell to $2 per share while its EPS fell to $0.25, the P/E would fall to ____.

A 5 Correct Answer Incorrect Answer
B 6 Correct Answer Incorrect Answer
C 7 Correct Answer Incorrect Answer
D 8 Correct Answer Incorrect Answer
E 9 Correct Answer Incorrect Answer

Solution

It's important to note that a lower P/E can also be a sign of trouble. If the same company's stock price fell to $2 per share while its EPS fell to $0.25, the P/E would fall to 8 = ($2/0.25). 

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