Assume that the present value of expected ROPI follows a perpetuity with growth g (Value = Amount/ [r -g]). Determine the theoretically correct PB ratio for each of the following companies A and B. Note: NOPAT = NOA - RNOA. Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI $100 $100 19% 19% 10% 2% $100 $100 12% 12% 10% 4% A B Round answers to two decimal places. PB Ratio Company A Company B

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Determining PB Ratio for Companies with Different Returns and Growth
Assume that the present value of expected ROPI follows a perpetuity with growth g (Value = Amount/ [r - g]). Determine the theoretically correct PB ratio for each of the
following companies A and B. Note: NOPAT = NOA » RNOA.
Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI
$100
$100 19% 19%
10%
2%
$100
$100
12% 12%
10%
4%
A
B
Round answers to two decimal places.
PB Ratio
Company A
Company B
Transcribed Image Text:Determining PB Ratio for Companies with Different Returns and Growth Assume that the present value of expected ROPI follows a perpetuity with growth g (Value = Amount/ [r - g]). Determine the theoretically correct PB ratio for each of the following companies A and B. Note: NOPAT = NOA » RNOA. Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI $100 $100 19% 19% 10% 2% $100 $100 12% 12% 10% 4% A B Round answers to two decimal places. PB Ratio Company A Company B
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