This question requires you to calculate the “intrinsic P/E” of American and Belle Cuisine foods. Two questions: 1) Is Intrinsic P/E always the Leading P/E? Cause they calculate (1-b)/(r-g), not (1-b)(1+g)/(r-g). 2) Why is the higher P/E the lower value? I learned that if the intrinsic P/E is say 10, and you’re company is trading at 9, the company is undervalued.
the way I interpreted it, when you are comparing two similar growth and risk companies, use PEG ratio chose one with lower PEG. Default P/E is leading P/E
So is intrinsic P/E equal to justified P/E or not???
YES
Then CFAI answer is wrong… agree?