Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 0 of 6
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 was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
calculate the value of a private company using free cash flow, capitalized cash flow, and/or excess earnings methods;
explain factors that require adjustment when estimating the discount rate for private companies;
compare models used to estimate the required rate of return to private company equity (for example, the CAPM, the expanded CAPM, and the build-up approach);
CFA® 2026 Level II Curriculum, Volume 4, Module 25.