Question

Use the following inputs and the finite horizon from of the residual income model to compute the value of Southern Trust Bank (STB) shares as of 31 December 2007: a. ROE will continue at 15% for the next five years and 10% thereafter with all earnings reinvested (no dividends paid) b. Cost of equity is 10% c. Beginning period book value at year-end 2007 is $10 d. Premium over book value at the end of five years will be 20 percent

Answer 1

the correct answer is (C)

Step-by-step explanation:

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