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Using the constant - growth DCF ( discounted cashflow ) formula, the Price - to - Book ratio can be expressed as P 0 BVPS

Using the constant

-

growth DCF

(

discounted cashflow

)

formula, the Price

-

-

Book ratio can be expressed as

0

BVPS

=

ROE

ROEr

ROE

where BVPS is the book value per share, ROE is the return on equity, r is the capitalization rate and b is the plowback ratio. Which of the following statement is CORRECT?

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