# Two quick clarifications: intrinsic p/e and soft dollar

The definition of intrinsic P/E…i have seen two versions one is the one with the tangible and franchise value the other one was how schweser defines as justified p/e with the (1-b)/r-g which one is it? also what is the thing with agency and principal trades with soft dollars? anyone know where this came up in ethics?

intrinsic p/e = tangible + franchise = 1/r + franchise factor x growth factor = 1/r + [(1/r) - (1/ROE)][g/(r-g)] justified p/e = (1-b)/(r-g) if no erisa or investment acts princ and agency is the same. if erisa or investment acts in place then for principal you can use client soft dollars for other clients as long as u get consent and disclose

intrinsic P/e = tangible p/e + franchise p/e = 1/r + (1/r - 1/ROE)[g/(r-g)] intrinsic P/e = justified p/e = (D1/E1) / (r-g) = (1-b) / (r-g) Yeah, I don’t know how you get these equations to equal one another, but I’m pretty sure it should give the same answer. I did instrinsic P/E the second way on a question where they were clearly trying to get me to use franchise p.e and came out with the right answer.

one formula is derived from the other. derivation is in the text - if you want to look it up.

the intrinsic P/E formulas do give you the same answer. there was a question on the mocks where they showed you could solve it either way.

could you clarify what you meant by the show? about the soft dollar with erisa?