FNCE 3P96 Chapter 1: Page 3

Derive the Gordon model and the P/E ratio, P/BV and the P/Sales

Please derive in detail

) The payoff to the holder of a put option is given by:

A) P= max(S - K, 0)

B) P = max(K, 0)

C) P = max(K - S, 0)

D) P = min(S - K, 0)

Given our understanding of the three fundamental drivers for DCF and relative valuation, which version of P/E gives the best estimate of relative value?

a. P/E TTM

b. Current P/E

c. P/E forecasted