Justified P/B - Potential Errata?

CFA Level II Equities
#1

Volume 4, Study Session 12, Reading 42, EoC Question # 17

This question asks the candidate to calculate the implied growth rate and ROE for a stock using the Justified P/B ratio. The answers in the back use the following formula for the calculations:

(ROE - r) / (r - g)

Isn’t this wrong? I thought the formula was a follows:

(ROE - g) / (r - g)

Am I crazy? What am I not understanding? No errata has been posted to date.

#2

P/E = (1-b) / (r-g)

P/B = P/E * E/B = E/B * (1-b)/(r-g) = ROE * (1-b) / (r-g) = (ROE-g)/(r-g) = 1 + (ROE-r)/(r-g)

maybe you are missing the 1 + in the formula that you have typed.

#3

Ha! That is exactly right. Thank you so much.

#4

Simply

P/B = (ROE-g)/(r-g) = 1 + (ROE-r)/(r-g)