Solution: “Intrinsic P/E = (1 – b) / (r – g)” The inputs to the solution in this problem are based on most recent period data - not forecast data. As such, it seems the information being utilized is best suited for TRAILING P/E, in which the correct notation would be: “Intrinsic P/E = (1 – b)(1+g) / (r – g)” Can anyone provide guidance on the correct angle to approach this problem, and why it is evident here?
if you are using it to forecast valuation - leading P/E would be the right one to use…
Yes…we are forecasting…I just think of “intrinsic” P/E as the usual payout/r-g. We don’t want trailing P/E, we want leading P/E as cp says