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Compute the value of southern trust bank

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Reference no: EM133060179

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:

i. ROE will continue at 15% for the next five years and 10% thereafter with all earnings reinvested (no dividends paid)

ii. Cost of equity is 10%

iii. Beginning period book value at year-end 2007 is $10

Reference no: EM133060179

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