If a bank has the following ratios, it can pay up to of its earnings as dividends. Tier 1 leverage = 4.7% Tier 1 common equity risk-based 7.2% %3D Tier 1 risk-based 8.3% Total capital risk-based 11% %3! %3D
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- Suppose that the Tier 1 equity ratio for a bank is 6%. What is the maximum dividend, as a percent of earnings, that can be paid if (a) there is no countercyclical buffer and (b) there is a 2.5% countercyclical buffer?If a bank has a leverage ratio of 0.5 and a return on assets of 1%, what is its return on equity? Select one: OA 0.2% O B. 2% OC 5% O D. 20%You have the following information on a company on which to base your calculations and discussion: Cost of equity capital (rE) = 18.55% Cost of debt (rD) = 7.85% Expected market premium (rM –rF) = 8.35% Risk-free rate (rF) = 5.95% Inflation = 0% Corporate tax rate (TC) = 35% Current long-term and target debt-equity ratio (D:E) = 2:5 a. What are the equity beta (bE) and debt beta (bD) of the firm described above?[Hint: Assume that the above costs of capital have been generated by an appropriate equilibrium model.] b. What is the weighted-average cost of capital (WACC) for this firm at the current debt-equity ratio? c. What would the company’s cost of equity capital become if you unlevered the capital structure (i.e. reduced gearing until there is no debt)
- The following data pertains to Xena Corp. Xena Corp. Total Assets $21,249 Interest-Bearing Debt (market value) $11,070 Average borrowing rate for debt 10.2% Common Equity: Book Value $5,535 Market Value $23,247 Marginal Income Tax Rate 19% Market Beta 1.64 A. Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's weighted-average cost of capital: B. Using the information from the table, determine the weight on equity capital that should be used to calculate Xena's weighted-average cost of capital.How would you interpret the Tier 1 Leverage Ratio for these 3 banks? What do these ratios mean? Bank A 8.37%; Bank B 10.70%; Bank C 10.57% 2. How would you interpret the Cost of Funds (CoF) for these 3 banks? What do these percentages mean? Bank A 21.32%; Bank B 7.21%; Bank C 123.89%Bank ABC has a Return on Equity (ROE) equal to 24%, an equity/debt ratio equal to 0.05 and an asset utilisation ratio equal to 0.07. From this we know that the profit margin of bank ABC is?
- The following data pertains to Xena Corp. Xena Corp. Total Assets $21,249 Interest-Bearing Debt (market value) $11,070 Average borrowing rate for debt 10.2% Common Equity: Book Value $5,535 Market Value $23,247 Marginal Income Tax Rate 19% Market Beta 1.64 A. Using the information from the table, and assuming that the risk-free rate is 4.5% and the market risk premium is 6.2%, calculate Xena's cost of equity capital, using the capital asset pricing model: B. Using the information from the table, determine the weight on debt capital that should be used to calculate Xena's weighted-average cost of capital.Calculate the cost of equity with the CAPM Calculate the cost od debt based on what the company is currently paying for its debt - Beta of the industry = 1.16 - Equity Risk Premium = 6.97% - Risk-free rate = 3.77% - Objective capital structure of the industry = 13.24%A bank with $10,000 in assets has ROA =2% and ROE - 10%. What is its leverage ratio (TA/Equity)? A 2.5 B 5 C 4 D 1.25
- Bank ABC has a Return on Equity (ROE) equal to 22%, a total assets/debt ratio equal to 1.02 and an asset utilisation ratio equal to 0.02. From this we know that the profit margin of bank ABC is:A firm has a debt-to-equity ratio of 2. What is its equity multiplier? 01 O 2.5 03 O 1.5 O 2(a) A bank has an ROA of 1% and an ROE of 9%. What is the equity multiplier for the bank? (b) A bank has an ROA of 1% and an equity multiplier of 9. What is the ROE for the bank?