Reference no: EM131717244

Question: A group of businesspeople from the town of Mathews are considering filing an application with the state banking commission to charter a new bank. Due to a lack of current banking facilities within a 10-mile radius of the community, the organizing group estimates that the initial banking facility would cost about $3.2 million to build along with another $700,000 in other organizing expenses and would last for about 20 years. Total revenues are projected to be $510,000 the first year, while total operating expenses are projected to reach $180,000 in year 1. Revenues are expected to increase 6 percent annually after the first year, while expenses will grow an estimated 5 percent annually after year 1. If the organizers require a minimum of a 10 percent annual rate of return on their investment of capital in the proposed new bank, are they likely to proceed with their charter application given the above estimates?