Intrinsic Value horrible, search, substitute, remember

sabaruch

I know this is in Equity Investments CFAI book , bt did not find it on casual search of Schweser:

Lvl II style:
Intrinsic P/E = (1-b)/(r-g) , or (dividend payout ratio )/( r-g)

or in Lvl I style : ( substitute rr for b )

Intrinsic P/E= (1-rr)/(r-g)


You don't have to remember that horrible 1/r + FF*G formula , just remember the much simpler (1-rr)/(r-g) .

If you're asked for the Franchise P/E , you can always subtract 1/r from the above to get it

Franchise P/E = Intrinsic P/E - ( 1/r )

= ( 1-rr)/(r-g) - (1/r)