Question

Chapter 7, The Stock Market, the Theory of Rational Expectations and the Efficient Market Hypothesis

1. AK Steel Holding Corporation is a leading producer of flat-rolled carbon and carbon and stainless tubular products, primarily for automotive, infrastructure and manufacturing, construction and electrical power generation and distribution markets. AK Steel Holding Corporation projects the following earnings:

Year 1	Year 2	Year 3	Year 4	Year 5
$3.85	$4.62	$5.08	$5.60	$6.20

The dividend payout ratio (dividends/earnings) for each year is 70%. The projected earnings growth after year 5 is 5%. If AK Steel's equity cost of capital is 9%, what is the estimated value for AK Steel's stock? Note: Use the Dividend Discount Model.

Chapter 12, Financial Crises

3. What role did the shadow banking system play in the 2007-2009 financial crisis?

Chapter 9, Banking and the Management of Financial Institutions

2. What are the benefits and costs for a bank when it decides to increase the amount of its bank capital?

Answer 1

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