deletions | additions       diff --git a/section_textit_DDM_textit_RIM__.tex b/section_textit_DDM_textit_RIM__.tex  index 7451ec4..e58040d 100644  --- a/section_textit_DDM_textit_RIM__.tex  +++ b/section_textit_DDM_textit_RIM__.tex 
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\begin{equation}  \frac{P_{t}}{B_{t}}=1+\frac{1}{(1+R-\omega)}(ROE_{t+1}-R)  \end{equation}  This formula highlights some important facts. First the higher the \textit{ROE}, the higher  the \textit{PB}, everything else being equal; valuation can increase without destroying shareholder  returns as long as the \textit{ROE} also increases. Moreover given two companies with the same  \textit{ROE} but different \textit{PB}s, the higher \textit{PB} will either have a lower discount rate $R$ and/or have  a higher persistence rate $\omega$ (ability to generate more abnormal earnings). There is a clear  similarity between the \textit{PB-ROE} model and the Gordon Growth Model (\textit{GGM}). The \textit{GGM}  shows that the market value of equities is a trade-off between the discount rate and future  growth while the \textit{RIM} shows that the market value of equities is a trade-off between the  discount rate and the persistence rate. There is, thus, a close relationship between growth  and persistence of abnormal earnings. This is very intuitive since future abnormal earnings  drive investment which in turn drives growth in dividends.  $EV_{t}=\displaystyle\sum_{i=t+1}^{t+K}\frac{FCFF_i}{(1+R)^i}+EV_{t+K}$