Can someone explain the algebra and the rationale of the following equation?
P/B = (ROE - g) / (r - g) = 1 + (ROE - r) / (r - g)
Thank you!
Can someone explain the algebra and the rationale of the following equation?
P/B = (ROE - g) / (r - g) = 1 + (ROE - r) / (r - g)
Thank you!
USE SIMPLE ALGEBRA.
1 + (ROE-R)/(R-G) = [(R-G) + (ROE-R)]/(R-G) = (ROE-G)/(R-G)
Or ROE-G/R-G = [ROE-R + R-G] / R-G = 1 + (ROE-R)/(R-G)