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Interest on deposits in banks60Total interest income$8,623Interest on deposits3,018Interest on debentures1,140Total interest expense$4,158Net interest income$4,465Provision for loan losses200Noninterest income950Noninterest expenses1,720Income before taxes$3,495Taxes1,220Net income$2,275For Dudley Bank, calculate: a. Return on equityb. Return on assetsc. Asset utilizationd. Equity multipliere. Profit margin3
f.Interest expense ratiog. Provision for loan loss ratioh. Noninterest expense ratioi.Tax ratioj.Overhead efficiency4.Suppose that stockbrokers have projected that Murfreesboro Savings Bank will pay a dividend of $2.50 per share on its common stock at the end of the year; a dividend of $3.25 per share is expected for the next year, and $4.00 per share in the following two years. The risk-adjusted cost of capital for banks in Murfreesboro Saving’s risk class is 15 percent. If an investor holding Murfreesboro Saving’s stock plans to hold that stock for only four years and expects to sell it at a price of $50 per share, what should the value of the bank’s stock be in today’s market?5.XYZ Bank has a ratio of equity capital to total assets of 9 percent. In contrast, ABC Bank reports an equity-capital-to-asset ratio of 7 percent.a.What is the value of the equity multiplier for each of these institutions? Suppose that both institutions have an ROA of 0.67 percent.b.What must each institution’s return on equity capital be? c.What do your calculations tell you about the benefits of having as little equity capital as regulations or the marketplace will allow?6.Classify the following ratios as liquidity ratios, earning asset ratios, financial structure ratios, operating ratios, profitability ratios, or spread ratios.
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Fall '11
LauraCole
Balance Sheet, Generally Accepted Accounting Principles, Dudley Bank