Question

The following are earnings and dividend forecasts made at the end of 2008. The firm has a required equity return of 10 percent per year.


a. Forecast the ex-dividend earnings growth rate and the cum-dividend earnings growth rate for 2010 and 2011.
b. Forecast abnormal earnings growth for 2010 and 2011.
c. Calculate the normal forward P/E for this firm.
d. Based on your forecasts, do you think this firm will have a forward P/E greater than its nonna1 P/E?Why?


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  • CreatedMarch 17, 2012
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