Fundamnetal determinants of Residual Income

CFA Level II Equities
#1

How is the equation p0/b0=1+roe-r/r-g derived from roe-g/r-g?

#2

(roe-g)/(r-g) = (roe - r + r-g) / (r-g)

= (r-g)/(r-g) + (roe-r)/(r-g) = 1 + (roe-r)/(r-g)

[Simple manipulation]

#3

Wow… thanks alot… I spent half an hour trying to figure out and had no clue. Thanks a lot

#4

you could have gone the other way too:

1 + (roe - r) / (r-g)

= (r-g + roe -r) / (r-g)

= (roe - g) / (r-g)