Justified price-to-book value (P/B) ratio

Justified price-to-book value (P/B) ratio = P₀/B₀ = (ROE-g)/(r-g)


P₀ = D₁/(r-g)
g = ROE * (1-d) = ROE - ROE * d
ROE * d = ROE - g

Justified price-to-book value (P/B) ratio
= P₀/B₀
= (D₁/B₀)/(r-g)
= (E₁/B₀)*d/(r-g)
= ROE*d/(r-g)
= (ROE-g)/(r-g)