Assume that abnormal earnings are earned for perpetuity with growth g. Determine the theoretically correct...
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Finance
Assume that abnormal earnings are earned for perpetuity with growth g. Determine the theoretically correct PB ratio for each of the following companies A and B
Firm
NOA
BVE
ROE
Cost of Equity
g
A
100
100
18%
15%
2%
B
100
100
11%
10%
4%
NOA is Net Operating assets and BVE is book value of equity
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