Mock - AM: Q57 (Intrinsic P/E) best, problem, solution, guidance, correct

luckygiftvn

Solution:
"Intrinsic P/E = (1 – b) / (r – g)"

The inputs to the solution in this problem are based on most recent period data - not forecast data. As such, it seems the information being utilized is best suited for TRAILING P/E, in which the correct notation would be:
"Intrinsic P/E = (1 – b)(1+g) / (r – g)"

Can anyone provide guidance on the correct angle to approach this problem, and why it is evident here?

KungFuPanda

Yes...we are forecasting...I just think of "intrinsic" P/E as the usual payout/r-g. We don't want trailing P/E, we want leading P/E as cp says

President1988

if you are using it to forecast valuation - leading P/E would be the right one to use..

CP