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P/E Ratio problem Looking at this problem Formula: ln (x) = (No of years superior growth antecipated) * ln {(1+Annual growth rate)/(1+market rate)} a. the

P/E Ratio problem

Looking at this problem Formula:

ln (x) = (No of years superior growth antecipated) * ln {(1+Annual growth rate)/(1+market rate)}

a. the next 10 years ln(x)=10*ln(1.18/1.08) =10*0.08855 =0.8855 So, x=2.4242 P/E=2.4242 * market multiple =2.4242*18 =43.6355

I see the 10*In(1.18/1.08) which is 10*In(1.0925), I CAN'T FIGUERE OUT WHERE YOU GET 10*.08855??

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