bannisja Wrote: ------------------------------------------------------- > a company that can’t pass on all of inflation > through will have a (higher/lower- pick one) P/E > ratio than a firm that can pass off inflation > fully. > > part 2: > > r = .12 > you can pass through 60% inflation > inflation = 5% P/E = 7.14 > ^ do it for 100% pass through and then tell me > higher or lower. this is one you need to drill > into your head. it’s lower P/E if you can’t pass > through all of the inflation. Higher P/E = 1/.12 = 8.33 100% pass through will cancel the second part of the denominator.