CFA Practice Question
(1 + g) / (r - g) is the formula to calculate ______.
A. P/E
B. P/S
C. P/CF
Explanation: P / Cash Flow per Share = (1 + g) / (r - g). Note that g is the expected growth rates of future cash flows!
User Contributed Comments 1
| User | Comment |
|---|---|
| andrewevelyn | Because that equation is basically an annuity formula, which can be applied direct to CF. No need to worry about factors like the payout ratio, etc. |