You are valuing a bank. The bank currently has assets of $300 per share. Five years from

Question:

You are valuing a bank. The bank currently has assets of $300 per share. Five years from now (that is, 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 an 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?

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...

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