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

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?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...