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An analyst computes intrinsic PE as (1 − b)/(k − b·ROE). With retention b = 0.4, k = 12%, ROE = 15%, the intrinsic PE multiple is:
A12.0
B10.0
C16.7
D8.3
Answer & Solution
Correct answer: B. 10.0
1. Identify what the question asks: this concept maps to pemultipleformula (§1.1).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (B).
_Source: ICAI BoS CA Final Paper 2, Ch 4 "Security Analysis"_
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