Question
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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