P/B zero

P/B = (ROE-g) / (r-g) = (1-b) x ROE / (r-g) If b=1 (retain 100% earnings), then P/B = zero. How is that possible?


This is based off the DDM. No dividends means to cash flows to the investor and no value.


mwvt9 pulled the rabbit out of the hat.

So this formula can’t be used for companies that do not pay any dividend? I guess we can try the other one P/B = 1 + PV(future residual income).