If a bank attracts new equity to increase its Tier 1 capital ratio, what happens to its cost of equity and its intrinsic value if it invests the new equity capital in (1) deposits with the central bank, or (2) a broad equity market index ...

The cost of holding equity capital is the socalled tax penalty whose present va ...

If a bank attracts new equity to increase its Tier 1 capital ratio, what happens to its

Question:

If a bank attracts new equity to increase its Tier 1 capital ratio, what happens to its and its intrinsic value if it invests the new equity capital in (1) deposits with the central bank, or (2) a broad equity market index?
Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...