# If you ever wondered...

The 2010 Schweser QuickSheet also shows E1/r

cpk123 Wrote: ------------------------------------------------------- > E0 vs. E1 is reprised on Q8© in the curriculum > on the chapter as well. > > PVGO only applies to “no-growth” company. So use > E0, even if E1 is given or g is provided and > enables you to be able to calculate E1. but on page 190 CFAI Equity book the footnote 15 clearly says we use estimated (future) earnings, not past earnings. also LOS 40.f says …the component of the leading P/E… (meaning P/E1) so if E1 is given, we should use E1, I think but I am confused…

look at 8© calculate it the way you have, look at the guideline answer and make your own conclusions… I have followed up on that same question with the CFAI Support team…

yeah interesting I think that the important factor is if E1 equals E0 under no growth assumption. here in the question I assume that we are pricing the stock at the same time we are deciding the dividends D0. if the D0 (lower than E0) were already decided then we couldnt assume E1=E0 because of the retention that already happened in the past. in that case we would have to estimate E1 = E0 x (1+ b x ROE) and assume future no growth with stable E = E1 also P/E1 = 1/r + ff x gf means ff x gf = PVGO /E1