CIMA F3 Syllabus D. Business valuation - Earnings Yield - Notes 10 / 15
This is the inverse of the PE ratio
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Basically this is how much your earnings are as a % of your share price
Value of Company using Earnings Yield = Total Earnings x 1/Earnings yield
PAT 300,000; Earnings yield 12.5%
What is the value of this company?
Solution
300,000 x 1/0.125 = $2,400,000