bbtomato

Don't have the answer in front of me, but if you look at the CFAI text in the footnotes it shows the transformation of the Gordon Growth to P/B.

cv4cfa

sorry...my challenges with attention led me to only see the question regarding "b"...

I am not the one to answer the rest of the question. I have just memorized to use the Gordon Growth Model with justified price multiples (r-g as the denominator)...

Can anyone help?

KungFuPanda

I should've known that. .it def. makes sense logically. . .I got confused b/c little b is used to represent retention rate elsewhere. .

But how does justified P/B = (ROE - g) / (r-g)?


Thanks planner!

mik82

B is earnings retention rate...



Edited 1 time(s). Last edit at Thursday, March 13, 2008 at 08:35PM by planner.