Swanand

guys,

use a little simple algebra, will you

1+(roe-r)/(r-g)
= (r-g + roe -r )/(r-g)
= (roe-g) / (r-g)

the 2nd formula is the RI related formula, for a RI in perpetuity.

ROE * BVPS = Net Income
r * BVPS = Equity Charge

so (ROE-r) * BVPS = Net Income - Equity Charge = Residual Income

And P = BVPS + RI in perpetuity
P = BVPS [1+(roe-r)/(r-g)]

CP