Equity Multiples Flashcards
1
Q
what are the two equations to calculate the value of equity?
A
Po= DPS (1+g)/ Ke -g Po= FCFE (1+g) / Ke - g
2
Q
How do we calculate current PE ratio?
A
Price (0)Earnings (0) = Payout ratio (1+g) / Ke - g
3
Q
How do we calculate forward PE ratio?
A
Price (0)Earnings (1) = Payout ratio / Ke - G
4
Q
How do we calculate PEG?
A
Price (0)Earnings (0) Growth (5est) = Payout ratio / Ghigh (Ke - G)
5
Q
When do we use Price to FCFE ratio?
A
when firms don’t pay dividend
6
Q
When can P/BV ratio not be calculated?
A
when book value is negative
7
Q
what is the main driver of P/BV?
A
ROE, which also drives g
8
Q
what is main driver of the P/S ratio?
A
profit margin
9
Q
how is the earnings growth rate calculated?
A
earnings growth rate= retention ratio x ROE
