Grand Bank is a mature bank, in stable growth. The bank is expected to report net income of $107 million and pay dividends of $79 million next year. If the book value of equity at the bank is $848 million, and the cost of equity is 9.07%. Estimate the value of equity in the book today
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Grand Bank is a mature bank, in stable growth. The bank is expected to report net income of $107 million and pay dividends of $79 million next year. If the book value of equity at the bank is $848 million, and the
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- You are valuing a bank. The bank currently has assets of $320 per share. Five years from now (that is, at the end of five years), you expect their assets per share to be $460. After Year 5. you expect their assets per share to grow at 3.5 percent per year forever. The bank has an ROA of 1.6 percent and an ROE of 12.0 percent. The bank's cost of equity is 11.0 percent. What is the value of the bank's stock? Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent.Suppose that a bank has $10 billion of one-year loans and $30 billion of five-year loans. These are financed by $35 billion of one-year deposits and $5 billion of five-year deposits. The bank has equity totaling $2 billion and its return on equity is currently 12%. Estimate what change in interest rates next year would lead to the bank's return on equity being reduced to zero. Assume that the bank is subject to a tax rate of 30%.BNB bank estimates that its total revenues will amount to $350 million, and its total expenses (including taxes) will equal $220 million this year. Its liabilities total $3,800 million while its equity capital amounts to $110 million. What is the bank's return on assets? Is this ROA high or low? How could you find out?
- King Messi Corp. is expected to have $20 earnings before interest and taxes every year in perpetuity and a tax rate of 20%. The firm is financed with $100 in debt and the remainder with equity. The firm’s cost of debt is 5%. Its earnings after taxes are expected to be fully paid out as dividends. Based on this information, what is the total cash flow to debt and equity holders? Answers: 16 17 18 19 20A company is projected to have a free cash flow of $357 million next year, growing at a 4.4% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.4%. The company's cost of capital is 9.3%. The company owes $129 million to lenders and has $8 million in cash. If it has 279 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.First Safe Interstate Bank is a small, regional bank that is trading at a price to book (equity) ratio of 1.50. The bank is in stable growth, with earnings and dividends expected to grow 3% a year in perpetuity. The stock has a beta of 1, the risk-free rate is 5% and the equity risk premium is 4%. Assuming that the market has priced this stock correctly, estimate the expected return on equity for the bank. b. Now assume that as a result of the banking crisis of the last few weeks, you expect the regulatory authorities to raise capital requirements immediately for banks by 20%. (Banks will need 20% more book equity to deliver the same net income). Also, assume that the equity risk premium has risen to 6%. If the stable growth rate remains 3%, estimate the new price to book equity ratio for First Safe Interstate Bank.
- A company is projected to generate revenues of $304 million and $423 million over the next two years. After that, the company is assumed to enter its terminal phase with steady growth. Given the following information, how much is each share worth today? Answer in dollars rounded to one decimal place. Forecasted operating margin: 43.2%. Forecasted tax rate: 18.3%. Forecasted reinvestment rate: 57%. Forecasted steady growth rate of free cash flow: 1.7% per year. Cost of capital: 9.2%. Debt: $34 million. Cash: $29 million. Shares outstanding: 13 million.Please find attached an Excel spreadsheet with forecasts for Kandy Kanes, Co. Five years of earnings, depreciation, and capital expenditures have been estimated by your equity analyst, and you believe that after the fifth year, free cash flow will grow by 4.5% per year. The market value of debt is $2,500,000 and the firm has $150,000 in marketable securities. There are 750,000 shares outstanding, the tax rate is 25%, and the discount rate (WACC) is 9%. Please do the following: Calculate free cash flow for the next five years Calculate free cash flow for the sixth year assuming a 4.5% growth rate Estimate the value of a share of Kandy Kanes' stock.Suppose that the assets of a bank consists of $100 million of loans to A rated corporations. The PD for the corporations is estimated as 0,1% and LGD is 60%. The average maturity is 2.5 years for corporate loans. What is RWA?.
- For the next fiscal year, you forecast net income of $51,100 and ending assets of $506,900. Your firm's payout ratio is 10.2%. Your beginning stockholders' equity is $298,800, and your beginning total liabilities are $120,700. Your non-debt liabilities, such as accounts payable, are forecasted to increase by $10,000. What will be your net new financing needed for next year? The net financing required will be $. (Round to the nearest dollar.) CFor the next fiscal year, you forecast net income of $51,900 and ending assets of $508,000. Your firm's payout ratio is 10.2%. Your beginning stockholders' equity is $295.900, and your beginning total liabilities are $120,800. Your non-debt liabilities, such as accounts payable, are forecasted to increase by $9,800. What will be your net new financing needed for next year? The net financing required will be $ (Round to the nearest dollar)A company is projected to generate free cash flows of $457 million next year, growing at a 4.4% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.8%. The company's cost of capital is 10.1%. The company owes $268 million to lenders and has $24 million in cash. If it has 179 million shares outstanding, what is your estimate for its share value? Round to one decimal place.