A bank currently just meets its total capital requirements of 8%.The bank currently has a dividend payout ratio of 25%.Assets are expected to grow at 5%.

a)What is the required ROA to support the growth in assets?

b)If the bank expects its ROA to be 0.5%, what is the maximum dividend payout ratio to support the increase in assets?

c)If the bank expects its ROA to be 0.5% and the bank does not wish to change its dividend payout ratio from 25%, how much new equity capital (as a percent of total assets) must the bank issue to support the growth in assets?

Answer rating: 100% (QA)

a To calculate the required Return on Assets ROA to support the growth in assets we need to consider the banks capital requirements and the expected g... View the full answer