I saw a problem in Schweser where growth needs to be computed by the following inorder to calculate justified p/b g= ROE * RR However, the follwing growth is given as 13%. But it can also be computed from the data given in the question using the following equation. g= 18* .65=11.7 Why is it different(13% vs 11.7)? I know that g calucated from ROE is sustainable growth and growth given as expected growth. But if growth is not given in following question, Is it ok to derive it using the equation of sustainable growth? A firm has a payout ratio of 35 percent, a return on equity (ROE) of 18 percent, an estimated growth rate of 13 percent, and its shareholders require a return of 17 percent on their investment. Based on these fundamentals, a reasonable estimate of the appropriate price-to-book value ratio for the firm is: A) 1.58. B) 2.42. C) 5.09. D) 1.25. Your answer: D was correct! P /BV = ROE - g/r - g = .18 - .13/.17 - .13 = 1.25