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Basic Question 0 of 7
Since D/P = (r - g) / (1 + g), and P/CF = (1 + g) /(r - g), therefore D/P = CF/P. True or False?
User Contributed Comments 8
| User | Comment |
|---|---|
| HenryQ | Good question! |
| ikaneng | which also means that if the 2 g's are equal, then D/P = CF/P? |
| gnacinka | dividend is a kind of CF, but different that they mean |
| NIKKIZ | Mathematically, 1+g/r-g is not equal to r-g/1+g... |
| NIKKIZ | Or am I incorrect? |
| sogah | very good question lol |
| endurance | KA-boom ... very useful for understanding the concepts |
| JMBrown | NIKKIZ,1+g/r-g is P/CF and they are comparing D/P and CF/P using the reciprocal. So it would actually be D/P=r-g/1+g and CF/P=r-g/1+g only with varying definitions for g. |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
describe the capital allocation process, calculate net present value (NPV), internal rate of return (IRR), and return on invested capital (ROIC), and contrast their use in capital allocation
CFA® 2026 Level I Curriculum, Volume 2, Module 5.