P/BV Calculation (Equity section) reading, equation

former

Equity reading 44 page 518:

How do we get to the equation

P/B=(ROE-g)/(r-g) ?

Thanks very much

jacksparrow

P = D1/(r-g)=E1*(1-RR)/(r-g)=BV*ROE(1-RR)/(r-g)=BV*(ROE-g)/(r-g) since g = RR*ROE.

FinancialAnaly

Wow nvm it's footnoted.

Pegasus2008

yeah, srsly, just memorize so that on the exam you can plug and chug.

also, you should probly know this one:

P/B = 1 + (RoE - r)/(r-g)

mainly because it helps you remember this one:

P = B + B(RoE-r)/(r-g)