Question
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
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 Avg. Cost of Capital | Growth Rate in ROPI |
|---|---|---|---|---|---|---|
| A | $100 | $100 | 18% | 18% | 15% | 2% |
| B | $100 | $100 | 11% | 11% | 10% | 2% |
Round answers to two decimal places.
| PB Ratio | |
|---|---|
| Company A | Answer |
| Company B | Answer |
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Financial Literacy For Young Adults Simplified Discover How To Manage Save And Invest Money To Build A Secure And Independent Future
Authors: Raman Keane
1st Edition
8399806501, 979-8399806501
