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Please show all calculation with formula step by step Now assume that you are comparing the price-to book ratios of the 13 largest banks in

Please show all calculation with formula step by step

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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