Downey, Jr. is a distributor of Black Sabbath tee shirts. S. Joe Hanson, CFO of Downey, Jr., has developed the following forecasts of comprehensive income:

Year	Projected Comprehensive Income	Present Value Factors
2024	$17,450	.9091
2025	$22,500	.8264
2026	$26,000	.7513
2027	$21,000	.6830
2028	$18,500	.6209

The company's cost of equity capital is 10%. Downey Jr.'s common shareholders' equity on January 1, 2024, is $100,000. Management intends to pay out all income in dividends every year. The company expects comprehensive income to grow at a rate of 4 percent per year in 2029 and beyond.

Using the residual income model, compute the value of Downey, Jr. as of January 1, 2024. Use the mid-year adjustment.

Answer rating: 100% (QA)

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