It is defined as price divided by the average of ten

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Unformatted text preview: -to-earnings ratio, commonly known as CAPE or Shiller P/E, is a valuation measure usually applied to broad equity markets. ● It is defined as price divided by the average of ten years of earnings, adjusted for inflation. Cape 1881-2013 Cape (2) Cape (3) Sustainable growth ● Sustainable growth rate, or SGR, is the maximum pace at which a company can grow revenue without depleting its financial resources. ● This metric assumes that over the evaluation period: a. the company will grow sales as rapidly as market conditions permit; b. management is unwilling to sell new equity; c. the company maintains it current capital structure and dividend policy. ■ current capital structure <-> constant debt-toequity ratio Sustainable growth (2) ● As growth requires commensurate increases in assets for support — without equity issuance, any asset increases must be funded with added lia...
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This document was uploaded on 02/23/2014 for the course CB 3410 at City University of Hong Kong.

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