Equity Investments - Equity Investments Section 2

Avatto>>CFA Level 1>>PRACTICE QUESTIONS>>Equity Investments>>Equity Investments Section 2

100. Jill Angelica wishes to compute the fundamental leading P/E ratio of the firm SunBeams. She knows the retention ratio, the required rate of return on the stock and the worth of the dividend in dollars. Which of the following is most likely to be needed to help Angelica compute the leading P/E ratio?

  • Option : A
  • Explanation : The firm’s fundamental leading P/E Ratio is given by: Expected dividend payout ratio Required rate - growth rate of dividends Expected dividend payout ratio may be calculated by: 1– retention ratio. Therefore, the only bit of information needed for computation is expected constant growth rate of dividends.
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