CFA Practice Question

There are 96 practice questions for this study session.

CFA Practice Question

ABC Corp. has a retention ratio of 40% and a long term growth rate of 4.8%. If the required rate of return for this stock is 11.2%, what is the trailing P/E ratio for ABC?
A. 5.36
B. 9.38
C. 9.83
Explanation: Trailing P/E = P0/E0 = [(1-b)(1+g)]/(r-g) = [(1 - 0.4)(1+0.048)]/(0.112 - 0.048) = 9.83.

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