tobeornottobe

I was confused on this one for a while too.

We want to find trailing P/E. Our handy little formula is P/E0= ((1-b)(1+g))/(r-g)

We know that the GGM model is P=(D0(1+g))/(r-g). Swapping in the retention ratio allows us to use the current year's E0. The trailing P/E is not discounted whereas the leading P/E has been discounted by (1+g) as reflected in E1.