Dionysus Industries makes wines for holidays. Dionysus has a dividend payout ratio of 17% and total debt to equity of 65%. The company expects its sales for next year to grow by 7.8%. Industry analysis shows overall sales will increase by 8.6%. The industry average for a dividend payout ratio is 28% and total debt to equity is 105%. Which of the following factors suggests a higher fundamental P/E ratio for Dionysus?
a) Lower dividend payout ratio
b) Lower sales growth
c) Lower debt-to-equity ratio
Please help me with this question, anyone. The answer given is C. Explain the reason how a lower D/E ratio will result in a higher P/E ratio?
Do you have the solution of this question