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Message from discussion Why Does BAC Keep Sinking?
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vecima...@gmail.com  
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 More options May 9 2008, 9:13 pm
From: vecima...@gmail.com
Date: Fri, 9 May 2008 18:13:36 -0700 (PDT)
Local: Fri, May 9 2008 9:13 pm
Subject: Re: Why Does BAC Keep Sinking?
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Why would you be unhappy about it going down? you own some? well more
opportunity to buy more :).

Would anyone comment on this simple valuation of BAC at current price:

Today Price: $36.6 US
Quarterly Dividend : 0.64  ---> Annual Dividend = 4x0.64 = $2.56 US

Assuming divident does not grow and stays at this level for few years,
and discounting it conservatively by (4% Treasury + inflation rate +
margin) = 10%, present value of the dividend before tax would be
2.56/0.1 = $25.6 US, meaning you are paying $36.6 - $25.6= $10 US for
earnings (pre tax). Considering 30% tax would give 36.6 - 25.6 x 0.7 =
$18.6.

assuming no growth in EPS = $2.37 US for a while (conservative), gives
P/E = 18.6/2.37 = 7.8 for a big US bank, not involved in subprime.

Any comments?
Thanks!


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