A company with a return on equity (ROE) that equals its required return on equity has a justifiable P/B equal to 1.

Name: A company with a return on equity (ROE) that equals its required return on equity has a justifiable P/B equal to 1.
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Question

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When a company's ROE equals its required return on equity, it means the company is generating returns exactly at the level investors expect, justifying a price-to-book (P/B) ratio of 1.

A Company with a Return on Equity (ROE) That Equals