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Calculate the allowable growth in the banks assets

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Reference no: EM13882502

Suppose that a bank wants to grow during the next year but does not want to issue any new external capital. Its current financial plan projects a ROA of 1.25 percent, a dividend payout rate of 35 percent, and equity to asset ratio of 8 percent. Calculate the allowable growth in the bank's assets supported by these projections. What growth rate could be supported if the bank issued additional common stock equal to 1 percent of bank assets, with the same earnings projections?

Reference no: EM13882502

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