Question: Please help! show clear step by step calculations. I will upvote for your help! Now assume that you are comparing the price-to book ratios of
Please help! show clear step by step calculations. I will upvote for your help!
Now assume that you are comparing the price-to book ratios of the 13 largest banks in the United States in 2000. The following table summarizes the price-to-book ratios and the returns on equity earned by these firms
| Company Name | PBV | ROE | ||
| Wachovia Corp. | 2.05 | 18.47% | ||
| PNC Financial Serv. | 2.54 | 21.56% | ||
| SunTrust Banks | 1.91 | 15.35% | ||
| State Street Corp. | 6.63 | 19.52% | ||
| Mellon Financial Corp. | 4.59 | 23.95% | ||
| Morgan (J.P) & Co | 1.74 | 19.39% | ||
| First Union Corp. | 1.52 | 19.66% | ||
| FleetBoston Fin'l. | 2.25 | 20.15% | ||
| Bank of New York | 7.01 | 25.36% | ||
| Chase Manhattan Corp. | 2.60 | 24.60% | ||
| Wells Fargo | 3.07 | 17.72% | ||
| Bank of America | 1.69 | 19.31% | ||
| BanK of Montreal | 1.23 | 18.08% | ||
a.If you were valuing SunTrust Banks relative to these firms, would you expect it to have a higher or lower price-to-book ratio than the average for the group? Explain why.
b.If you regress price-to-book ratios against returns on equity, what would your predicted price-to-book ratios be for each of these companies?
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