Compute Topp Company’s price-earnings ratio if its common stock has a market value of $29.04 per share and its EPS is $4.80. Considering Lower deck, its key competitor, has a PE ratio of 9.5, which company does the market have higher expectations of future performance?

Since the Lower deck's price-earnings ratio of 9.5 is higher than Topp Company’s price-earnings ratio of 6.05, the market therefore have higher expectations of future performance of Lower deck.

Explanation:

Price-earnings ratio refers to the ratio of the market price per share (MPS) to the earning per share (EPS) of a company.

Topp Company’s price-earnings ratio can therefore, be computed using the following formula:

Topp Company’s price-earnings ratio = MPS / EPS (1)

Where;

MPS = Common stock market value = $29.04

EPS = $4.80

Substituting into equation (1), we have:

Topp Company’s price-earnings ratio = $29.04 / $4.80 = 6.05

It should be noted that companies that have a high Price Earnings Ratio are usually referred as growth stocks. The implication of this is that there is a positive future performance which makes investors to have higher expectations for future earnings growth. As a result, the investors are ready to pay more for the stock of the firms.

Since the Lower deck's price-earnings ratio of 9.5 is higher than Topp Company’s price-earnings ratio of 6.05, the market therefore have higher expectations of future performance of Lower deck.

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.

answer; according to the ( irs );