Consider the following financial information three commercial banks: bn Indicator Assets Liabilities Equity capital Interest income Interest expense Other income Operational costs Profit after tax A 60.00 54.00 6.00 1.25 1.00 0.55 0.80 0.30 Bank B 50.00 46.00 4.00 0.75 0.65 0.40 0.50 0.20 55.00 50.00 5.00 1.00 0.80 0.48 0.75 0.23 Also assume that the risk free interest rate is 4% and that the equity premium is currently at 5%. Consider the information on the market B associated with each of the banks described above in the following table: A 1.40 Bank B C 1.10 1.15 a) Calculate the return on assets (ROA), return on equity (ROE) and cost efficiency for each of the banks. Which of the banks is more efficient? [10 points] b) Calculate the cost of capital for all three banks. [5 points] c) Which banks would you invest in? Justify your answer and discuss whether measures like cost of capital are really necessary if investors have full access to balance sheet and income statement data when assessing bank profitability. [10 points]