Please show all calculation with formula step by step Now assume that you are comparing...
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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 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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