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Basic Question 3 of 4
What models provide the basis and rationale for the method which is based on forecasted fundamentals?
B. Discounted cash flow models.
C. The law of one price.
A. P/E comparables.
B. Discounted cash flow models.
C. The law of one price.
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Learning Outcome Statements
contrast the method of comparables and the method based on forecasted fundamentals as approaches to using price multiples in valuation, and explain economic rationales for each approach;
calculate and interpret a justified price multiple;
describe rationales for and possible drawbacks to using alternative price multiples and dividend yield in valuation;
CFA® 2025 Level II Curriculum, Volume 4, Module 23.