deletions | additions       diff --git a/section_textit_DDM_textit_RIM__.tex b/section_textit_DDM_textit_RIM__.tex  index 000fd06..33156ba 100644  --- a/section_textit_DDM_textit_RIM__.tex  +++ b/section_textit_DDM_textit_RIM__.tex 
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\begin{equation}  P_{t}=B_{t}+\displaystyle\sum_{i=1}^{K}\frac{A_{t+i}}{(1+R)^i}-B_{t+K}+P_{t+K}  \end{equation}  where $P_{t}$ is the stocks price at $t$, $B_{t}$ is the book value at $t$, $A_{t+i}$ the future abnormal earnings  in $t+i$, $R$ the discount rate and $P_{t+K}$ the terminal value. It is now obvious that a market  value of equity superior to its book value necessarely implies that the company generates  abnormal earnings i.e. that its\textit{ROE} is above the shareholder expected return (Cost Of  Equity).  Abnormal earnings are the ability of the company to generate more earnings than what  investors are asking for. Under General Equilibrium Theory assumptions, abnormal earnings  do not last indefinitely and tend to fade away. If we assume that at a period sufficiently far  out in the future $t+k$, abnormal earnings have been arbitraged away and disappear, then  market value of equity must equal the book value and the formula (3) becomes   \begin{equation}  P_{t}=B_{t}+\displaystyle\sum_{i=1}^{K}\frac{A_{t+i}}{(1+R)^i}  \end{equation}  Using similar mathematical simplification tools than the ones used in the Gordon Growth Model, we can simplify   \begin{equation}  P_{t}=B_{t}+\frac{1}{(1+R-\omega}A_{t+1}  P_{t}=B_{t}+\frac{1}{(1+R-\omega}(E_{t+1}-RB_{t})  \end{equation}