Sign up  |  Log in

Schweser MQ31.2

Can someone please explain how to go about this problem? Thanks in advance. 

“Creative Toys recently paid a dividend of $1.35 a share. It has a payout ratio of 67%, a ROE of 23%, and an expected growth rate in earnings and dividends for the foreseeable future of 7.6%. Shareholders require a return of 14% on their investment. The justified price to book value multiple is closest to:”

"Using Wiley for my CFA journey was by far the best option… I was able to pass on my first attempt.”– Moe E., Canada

Still don’t understand this one

The formula is:

Justified P/B = (ROE − g) / (rCEg)

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams