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CFA Level 2
Topic: Equity Valuation
Reading: Market-Based Valuation: Price and Enterprise Value Multiples

This session runs through the derivation of the Justified Price-to-Book Ratio. The justified P/B ratio is the P/B ratio of a company when the shares are fairly valued.

There are three components that drive the justified P/B ratio:
1) Return on equity
2) Growth rate
3) Required return on equity / Cost of equity

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