Reference no: EM131717474

Question: Monarch State Bank reports total operating revenues of $135 million, with total operating expenses of $121 million, and owes taxes of $2 million. It has total assets of $1.00 billion and total liabilities of $900 million. What is the bank's ROE? Alternative scenarios:

a. How will the ROE for Monarch State Bank change if total operating expenses, taxes, and total operating revenues each grow by 10 percent while assets and liabilities remain fixed?

b. Suppose Monarch State's total assets and total liabilities increase by 10 percent, but its revenues and expenses (including taxes) are unchanged. How will the bank's ROE change?

c. Can you determine what will happen to ROE if both operating revenues and expenses (including taxes) decline by 10 percent, with the bank's total assets and liabilities held constant?

d. What does ROE become if Monarch State's assets and liabilities decrease by 10 percent, while its operating revenues, taxes, and operating expenses do not change?