The constant-growth DCF formula is sometimes written as where BVPS is book equity value per share, b

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The constant-growth DCF formula

is sometimes written as

where BVPS is book equity value per share, b is the plowback ratio, and ROE is the ratio of earnings per share to BVPS. Use this equation to show how the price-to-book ratio varies as ROE changes. What is price-to-book when ROE = r?

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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Question Posted: Jun 08, 2011 03:53 AM

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The constant-growth DCF formula is sometimes written as where BVPS is book equity value per share, b

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DIV, Po

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From the equation given in the problem it follows th...View the full answer

Principles of Corporate Finance

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