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Future Return on Book Equity Number of Years Returns Will Continue 5 Years 0.8 1.0 1.2 10 Years 0.7 1.0 1.3 20 Years 0.6 1.0 1.4 30 Years 0.6 1.0 1.5 Number of Years Returns Will Continue 5 Years 10 Years 20 Years 30 Years Number of Years Returns Will Continue 5 Years 10 Years 20 Years 30 Years 1.4 1.7 30% of Earnings are Reinvested 2.0 2.2 70% of Earnings are Reinvested 100% of Earnings are Reinvested In this exercise, we're varying both the ROE and the number of years that the company is in operation. For the top third of this chart - the 30% of earnings reinvested section - try answering these questions (we'll consider the whole chart in a moment). Where will the highest Market-to-Book Ratio be? Where will the lowest Market-to-Book Ratio be? And will any of the Market-to-Book Ratios be equal to 1? Make sure to specify the horizon and the ROE in each of your answers. This is tough, but give it your best shot. Future Return on Book Equity Number of Years Returns Will Continue 5 Years 0.8 1.0 1.2 10 Years 0.7 1.0 1.3 20 Years 0.6 1.0 1.4 30 Years 0.6 1.0 1.5 Number of Years Returns Will Continue 5 Years 10 Years 20 Years 30 Years Number of Years Returns Will Continue 5 Years 10 Years 20 Years 30 Years 1.4 1.7 30% of Earnings are Reinvested 2.0 2.2 70% of Earnings are Reinvested 100% of Earnings are Reinvested In this exercise, we're varying both the ROE and the number of years that the company is in operation. For the top third of this chart - the 30% of earnings reinvested section - try answering these questions (we'll consider the whole chart in a moment). Where will the highest Market-to-Book Ratio be? Where will the lowest Market-to-Book Ratio be? And will any of the Market-to-Book Ratios be equal to 1? Make sure to specify the horizon and the ROE in each of your answers. This is tough, but give it your best shot.