PVGO = PV OF RI or not?

CFA Level II
#1

From V0 = E1/r + PVGO

divide by B0 then

P0/B0 = E1/(r*B0) + PVGO/B0

first term becomes 1?

which gives

P0/B0 = 1 + PVGO/B0 ???

Below is equation (5) from chapter 32.

P0/B0 = 1 + (PV of RI)/B0

#2

Only if rCE = ROE

#3

Is no growth company’s ROE = r ?

#4

yes

#5

if no growth company, ROE = r

P0/B0 = (ROE-g)/(r-g) = 1

then PVGO = 0 which means RI = 0

yes or no?

#6

V0 = E1/r + PVGO

= ROE*B0/r + PVGO

= ROE/r*B0 + PVGO

= B0 + PVGO

therefore,

PVGO = PV of RI

also,

Market value added

= Market value of company – Accounting book value of total capital

= PV of RI