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Why is EV/EBITDA often preferred to P/E for cross-company comparison?

  1. A It is unaffected by capital structure and differing depreciation policies
  2. B It includes tax effects
  3. C It is simpler to calculate
  4. D It reflects growth expectations better
Answer

It is unaffected by capital structure and differing depreciation policies

P/E is distorted by leverage and by accounting choices below the operating line, which complicates peer comparison.

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