Residual income for a bank

A private bank has book value ₹100 a share and cost of equity 13.5%. (a) Derive (6A.16) from the dividend discount model and clean surplus. (b) The bank earns ROE 17% and grows book 15% a year for 10 years, then ROE 15% and growth 8% forever. Compute P/B. (c) Repeat if ROE falls to the cost of equity after year 10 (growth 8%). (d) Compute the steady-state P/B with ROE 15% and growth 8%, and explain why (6A.17) cannot be used with ROE 17% and growth 15%.