Justified Price to Book

[archived_user]

Justified Price to Book = (ROE - g) / (r-g)
I have seen the textbook use g as given as the long-term growth rate in dividends/earnings and i have also seen g calculated using the sustainable growth rate (ROE *B)
Which one is it? Does it depend on something, if so what does it depend on?

 

[archived_user]

wouldn’t both the rates be the same? in any case roe x retention ratio is just roe x (1-dividends/earnings)

 

[archived_user]

rkaptyn wrote: Justified Price to Book = (ROE - g) / (r-g)
I have seen the textbook use g as given as the long-term growth rate in dividends/earnings and i have also seen g calculated using the sustainable growth rate (ROE *B)
Which one is it? Does it depend on something, if so what does it depend on?

It’s both. Simultaneously.