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One model that we studied of pricing common stock suggests that the price of equity at time 0 is equal to
the book value of equity at time 0
expected abnormal earnings in all future periods.
book value of equity at time 0 plus expected abnormal earnings in all future periods multiplies by discount factors for all future periods
book value of equity at time 0 minus expected abnormal earnings in all future periods multiplied by discount factors for all future periods.
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