Compute Plano Banks (PB) share price as of December 31, 2007, using the finite horizon...
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Compute Plano Banks (PB) share price as of December 31, 2007, using the finite horizon version of the residual income model. Given: (1) ROE will continue at 15 percent for the next five years (and 10 percent thereafter) with all earnings reinvested (no dividends paid), (2) Cost of equity equals 10 percent, (3) B0 = $10 per share (at year-end 2007), (4) Premium over book value at the end of five years will be 20 percent
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