Calculate the leading P/E ratio, given the following information: retention ratio = 0.6, required rate of return = 10 percent, expected growth rate = 5 percent. Calculate the leading P/E ratio Retention ratio (b) = 0.6 Required rate of return k = 10% Expected growth rate g = 5% P = D/EPS E kc-g D/EPS = Payout ratio = 1 - Retention ratio(b) = PIE (1 0.6)/(0.1 -0.05) P/E=8 The leading P/E ratio is 8