c) Assume that DeutscheBank has just paid a dividend of 0.75EUR. The discount rate is 5% and experts predict that dividends will grow on average by 3% indefinitely. Calculate the share-price via Gordons Dividend Growth Model. Redo the calculations for the situation that the market expects dividends to remain constant at 0.75 EUR indefinitely.

(5 marks)

d) In April 2017, Deutsche Bank raised $9.4bn additional capital with subscription price of $11.65 per new share. Show the according changes in a simplified balance sheet. Furthermore, briefly explain how a potential increase in the share price to $17 after the announcement of the subscription price would have impacted Deutsche Banks balance sheet.

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An adequate sufficiency? Common equity tier-1 capital ratio Q2 2016,% 0 4 8 12 16 UBS HSBC Credit Suisse Barclays BNP Paribas Socit Gnrale Deutsche Bank Banco Santander UniCredit Basel III ratios Capital ratios, per cent Common All Tier 1 Total equity capital capital Minimum 4.5% 6.0% 8.0% Conservation buffer 2.5% Minimum plus conservation buffer 7.0% 8.5% 10.5% Countercyclical buffer * 0-2.5% * Common equity or other fully loss-absorbing capital Source: BIS Source: Company reports Economist.com a) Assume the balance sheet of Deutsche Bank looks like the following. Copy it down into your answer booklet. Show the changes that result from Deutsche Bank paying the settlement fine of $7.2 billion to the DoJ. Assume that the DoJ wishes to receive the payment on their account at Deutsche Bank. Explain if the bank faces a liquidity and/or capital adequacy ratio problem. (3 marks) Assets in billion $ Cash + Reserves at ECB Liabilities and equity in billion $ $5 Demand deposits $100 Term deposits (6 months) $330 $475 Tier 1 Capital $50 Loans (Risk weight 100%) b) Explain how your answer from a changes, if the DoJ banks exclusively with Citibank, and insists on payment towards its Citibank account. (2 marks)