Okay, we're going to do someanalysis for Barclays Bank and what we'll also do is calculate their equity value, the PE ratio, the price to book value ratio. And having done that, we'regoing to have a discussion about those and think about what they really mean. So the first thing we need to do is to pick up the forecast earnings. So I know that we've got a forecast return on equity and I'm going to multiply that by the shareholders' Equity value the book value of shareholders' equity which is the same as the net asset value of 63.5, if you think about how a balance sheet works. Having got that we then want to think about one plus the growth rate of equity 3% and multiply that again by the net asset value which is the same as the shareholders' equity. So now if you think about a base analysis, beginning equity and net income subtract dividends comes to closing shareholder's equity. What we want to do isrearrange that base analysis in order to figure out what the dividends are. So if we go and pick the opening shareholder's equity and we add to that the netting income we've just calculated and subtract the ending shareholders' equity, then we get dividends of 3.5. So now we're in a great place to start calculate some ratios once we get the equity value. So the market value ofequity, we're going to go and pick up C17, which is our forecast dividend. And if you think about our Gordon growth model we're going to divide itby our cost of equity minus our growth rate.

And so if we do that then we get our market value of equity. So now we've got that market value. What's the P ratio? Well, let's go and grab the price and divide it by the earnings and let's now calculate the price to book value. So again, we're going to pick up the price and divide it by the book value of shareholders equity. Now that's interesting, we're asked to comment on the result. We've got a price to book value for Barclays of less than one. What does that really mean? Well, it could mean that Barclays is expected to generate returns below its cost of capital or it could be that the market believes that the book value of assets are overstated which is certainly the case during the financial crisis.