Question

The following forecasts of earnings per share (EPS) and dividend per share (DPS) were made at the end of 2009:


The firm has an equity cost of capital of 12 percent per annum. (This is the same pro forma used in the residual earnings valuation in Exercise E5.4.)
a. Calculate the abnormal earnings growth that is forecast for each year, 2011 to 2014.
b. What is the per-share value of the equity at the end of 2009 based on the abnormal earnings growth valuation model?
c. What is the expected trailing P/E for 2014?
d. What is the forecasted per-share value of the equity at the end of the year2014?


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  • CreatedMarch 17, 2012
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