Reply to each question with 250 words citations and reference
1. Identify three economic and three accounting factors that will drive a firm’s price-earnings ratio in a given period to be higher than that of other firms in the same industry. Identify three economic and three accounting factors that will drive a firm’s price-earnings ratio to go down in a given period or decrease over time.
2. In your own words, explain the theory behind the residual income valuation approach. Discuss why residual income value is relevant to common equity shareholders and explain the two roles of book value of common shareholder’s equity in the residual income valuation approach. In replies to peers, discuss whether you agree or disagree with their explanation of the theory and the role of book value of common shareholder’s equity.
