Following are financial statement information for Welmark Corporation as of Year 2 and Year 3.

Required:
Using the residual income model, prepare a valuation of the common stock of Welmark Corporation as of Year 3 under the following assumptions:
a. Forecast horizon of five years.
b. Sales growth of 10.65% per year over the forecast horizon and 3.5% thereafter.
c. All financial ratios remain at Year 3 levels.
d. Cost of equity capital is12.5%.

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WELMARK CORPORATION ear 2 Year 3 10.65% 8.22% 9.33 1.64 2.01 1,737 8.50% 6.71% Sales growth Net profit margin (Net incomeSales). Net working capital tumover (Sales/Average net working capita)8.98 Fixed asset turnover (Sales/Average fixed assets) Total operating assets/Total equity Number of shares outstanding 1.67 1,737 $ thousands) Sales Net income. Net working capital Fixed assets Total operating assets Long-term liabilities .. $25,423 $28,131 1,706 2,832 15,232 18,064 8,832 9,232 2,312 3,015 17,136 20,151 10,132 10,019