You are valuing a bank. The bank currently has assets of $330 per share. Five years from now (that is, at theend of five years), you expect their assets per share to be $470. After Year 5, you expect their assets pershare to grow at 3.25 percent per year forever. The bank has an ROA of 2.0 percent and an ROE of 13.0percent. The bank's cost of equity is 11.5 percent. What is the value of the bank's stock? Use the free cashflow to equity model to value this stock. Do not round intermediate calculations. Round your answer to thenearest cent.69

The return on equity determines a company's profitability in relation to its owners' equity. It…

Answered: . What is the value of the bank's…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8EB: You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how...

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A bank has DA = 2.4 years and DL= 0.9 years. The bank has total equity of $82 million and total assets of $850 million. Interest rates are at 6 percent. If interest rates increase 1%, the predicted dollar change in equity value will equal $10,171,698 -$10,171,698 O $12,724,528 -$12,724,528 $4,928,756
A bank projects that the value of an account they hold will be $2, 000, 000 in 5 years. If the account is earning 5% continuous compound interest, what is the current value of the account?
Accounting You have an investment account that started with $4,000 10 years ago and which now has grown to $11,000. a. What annual rate of return have you earned (you have made no additional contributions to the account ) ? round to two decimals places. b. If the savings bond earns 13% per year from now on, what will the accounts's value be 10 years from now ?
mn.3
Suppose you invest $1,100 in an account paying 5% interest per year. What is the balance in the account after 4 years? How much of this balance corresponds to "interest on interest"? What is the balance in the account after 30 years? How much of this balance corresponds to "interest on interest"? (Round to the nearest cent.)
You currently have $5,300. First United Bank will pay you an annual interest rate of 8.8, while Second National Bank will pay you an annual interest rate of 9.9. How many fewer years must you wait for your account value to grow to $13,000 at Second National Bank?
You invest 1,000 today in a bank, which of the following one refers to the value of your investment 5 years from now. a. Present Value b. None of them c. Principal Amount d. Future Value
A company needs $350,000 to pay a debt four years from now. The company can place cash in a 5% compounding interest-bearing account. How much money should the company invest today in order to meet the goal? Round to the nearest whole dollar.
You put 250.00 in a bank for 5 years at 12%. If intrest is added at the end of the year, what is the balance at the end of the 5th year?
Suppose you borrow $1,000,000 when financing a coffee shop which is valued at $1,300,000. You expect to generate a cash flow of $1,400,000 at the end of the year. The cost of debt is 5.5%. What is the cost of equity? Note: Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05
A company borrowed $100,000 from a local bank. The loan requires 10 equal annual payments beginning one year from today. Assume an interest rate of 8%. What is the amount of each annual payment? Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
You have an investment account that started with $2,000 10 years ago and which now has grown to $8,000. a. What annual rate of return have you earned (you have made no additional contributions to the account)? b. If the savings bond earns 13% per year from now on, what will the account's value be 10 years from now?

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