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And what’s the point of calculating the 2.5 if all you had to do was divide the price by EPS for the answer?

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Wait…i’m a bit confused. Why wouldn’t the answer be the second choice (3)? I thought the formula for the justified P/E was dividend payout ratio/r-g. I wasn’t aware you were actually supposed to calculate the P/E using current price/ EPS for the justified P/E.

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this may be a stupid question, but do we multiply by the ratio of the portfolio st.dev to market st.dev because that’s what beta is (correlation of risk between market and stock/portfolio)?

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double check the CFA books to see if its just a best practice to avoid IPOs. I just got a question wrong on a mock because I thought the best practice was the hard law, not the recommendation. If its a best practice, than that means that that is what the CFA would recommend, but its not necessarily saying you can’t participate in the IPO (sorry i would look for you, but I don’t have my books with me)

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@thomas111121‌ what is the original question and what calculator do you use? i wouldn’t algebraically solve the equation since it would be time consuming. i would use the TVM function on your calculator. based on the info you posted N=3, PV=102.96, FV=100, PMT=5, compute I/Y. you can also just guess and check based on the answer choices but that would take more time. 

hope that helps!

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the question provides you with all of the information you need to solve it. CAPM = RFR + B(RM-RFR). (RM-RFR) is also known as the market risk premium, so you can calculate the cost of equity using CAPM as they have above. does that help? if not i can try to better explain it. i cant provide a perspective on what the actual exam will be like since im taking it for the first time in about two weeks (trying not to panic) RFR= risk free rate; RM= market risk

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thanks @crimsonmoose and @jak5189! i was a bit thrown off since my study notes say net income instead of EPS…hopefully thats the only thing they were off on

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i didn’t see it in élan guides. my guess is its not that important in terms of the exam but may be good to know

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five more minutes….not that im obsessing or anything.

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congrats @jennifer!! commence the jumping around! im so glad im working  from home today due to the blizzard or my co-workers would think im bonkers 

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sorry to hear @jessmat and @maverick, but you guys are 10,000 miles ahead the game  for june!

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hey @blitzspades! i also prepared with elan, and i thought that their materials were excellent. i felt like they focused in on all of the right areas, and helped me become familiar with the “most important” concepts rather than getting bogged down with minute details. i felt like i wouldnt know what was important if i relied solely on the CFAI materials since there’s just so much. also, i used elan and schweser mocks to practice, and i found elan’s to be more difficult. i actually felt like their mocks were more difficult than the actual exam, so that’s always a good feeling.
sorry for the delay in response, i took a much needed break from all things CFA after taking level I

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I’m going to start studying today since my books just came in, so I hope its not too late lol. I loved the Elan material, I thought the mocks were tougher than Schweser’s and the actual exam.

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if only the exam was color coded to highlight key words…wishful thinking haha. but i definitely agree. a lot of my mistakes stem from the fact i dont take the time to properly read the question

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thanks! for some reason i read CAPM in the explanation instead of CML….sign i need a study break

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i’d be in indonesia volunteering! i had to postpone my exam because of the exam #cfawoes

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i find myself lip syncing random pop songs…im totally normal

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thanks everyone! i was originally going to do a bit of reviewing but now i think ill just puton my headphones, blast music and (terribly dance around…hopefully providing some comic relief to other candidates

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gains or losses on sales of equipment are non cash charges (they are just the difference between what the asset is recorded on the balance sheet and the cash the company gets paid for the asset) so they generally aren’t reported on the cash flow statement. instead you’d see proceeds from the sales on the CF statement

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@jmsatchwell, third times a charm! 😉

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