Determining PB Ratio for Companies with Different Returns and Cost of Capital Assume that the present value of expected ROPI follows a perpetuity with growth g (Value ???? Amount/

[r ???? g]). Determine the theoretically correct PB ratio for each of the following companies A and B.

Company Net Operating Assets Equity RNOA ROE Weighted Average Cost of Capital Growth Rate in ROPI A . . . . . . . . . . . . . . . $100 $100 18% 18% 15% 2%

B . . . . . . . . . . . . . . . $100 $100 11% 11% 10% 2%