Problem #9. You are valuing a bank. The bank currently has assets of $300 per share. Five years from now (at the end of
Posted: Mon May 02, 2022 9:24 am
Problem #9. You are valuing a bank. The bank currently has
assets of $300 per share. Five years from now (at the end of five
years), you expect their assets per share to be $450. After Year 5,
you expect their assets per share to grow at 3 percent per year
forever. The bank has a ROA of 1.2 percent and an ROE of 12.5
percent. The bank’s cost of equity is 11.5 percent. What is the
value of the bank’s stock?
assets of $300 per share. Five years from now (at the end of five
years), you expect their assets per share to be $450. After Year 5,
you expect their assets per share to grow at 3 percent per year
forever. The bank has a ROA of 1.2 percent and an ROE of 12.5
percent. The bank’s cost of equity is 11.5 percent. What is the
value of the bank’s stock?