
Concept explainers
Constant-growth DCF formula The constant-growth DCF formula:
is sometimes written as:
where BVPS is book equity value per share, b is the plowback ratio, and ROE is the ratio of earnings per share to BVPS. Use this equation to show how the price-to-book ratio varies as ROE changes. What is price-to-book when ROE = r?

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Chapter 4 Solutions
Principles of Corporate Finance
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