Does anyone know where the formula for this problem come from? I don’t see it in the LOS.
It’s in Equity. Reading on “Return Concepts” Includes Lamda in the formula.
Even with no formula this question was very logical your company has a higher ability to pass through the inflation so instead of having a low PE ( When it would bear high inflation) it will trade at a higher PE.
You’re right, I went back through after I posted and it was there, it’s been a long day.