
Current P/E = 15.6

Expected P/E 10 years prior: 15
How to calculuate the repricing return?
The solution is 0.4%.
Current P/E = 15.6
Expected P/E 10 years prior: 15
How to calculuate the repricing return?
The solution is 0.4%.
%ΔP/E = (15.6 − 15) / 15 = 0.4%
I wrote an article about GrinoldKroner that may be of some help: http://financialexamhelp123.com/grinoldkronermodel/
From what I recall, this is the process
=(15/15.6) ^ 0.1  1 = 0.39%
The answer is negative as expected PE is LOWER than current PE. The power is 0.1 because the decline is expected to take 10 years (1/10 = 0.1)
4%?
S2000magician your answer comes to 4%, I’d go with the Soft Dollars’ calculation (oops… its Hard Dollars)
That should be the solution.
What question from the text is this from?
It’s in the 2014.b Item Set Mock Exam. The Ptolemy case/item set.
^ thanks
This was a badly worded question; expected PE 10yrs prior… what does that even mean?..
.
FYI for everyone’s benefit.
Magician’s formula is correct. if you want to confirm, look at R 16 EOC 4 B.
Yes and Now. The EOC does not explicitly say that the capital market expectations are for a special future period.
If we refer to the next year (as I think it is in the EOC), it should be: %ΔP/E = (1515.6) /15.6 =  3.85%
If we refer to a 10year period, it should be: %ΔP/E = [(15/15.6)^0.1]1 =  0.39%
Right?
However, as I see now: Junes’s statement might be weird, too: Expected P/E 10 years prior : 15 > So, are you referring here to the past or the future
The solution shows June’s solution as the correct one. However, the wording is extremely weird, they should have left out the prior…
So, the 10year calculations should be more correct.
Maybe they base their expectations on historical data…