Question: An analyst presents you with the following preform a (in millions of dollars) that gives her forecast of earnings and dividends for 2010-2014. She asks

An analyst presents you with the following preform a (in millions of dollars) that gives her forecast of earnings and dividends for 2010-2014. She asks you to value the 1,380 million shares outstanding at the end of 2009, when common shareholders' equity stood at $4,310 million. Use a required return for equity of 10 percent in your calculations.

a. Forecast book value, return on common equity (ROCE), and residual earnings for each of the years2010-2014.
b. Forecast growth rates for book value and growth in residual earnings for each of the years 2011-2014.
c. Calculate the per-share value of the equity from this preform a. Would you call this a Case 1, 2, or 3 valuation?
d. What is the premium over book value given by your calculation? What is the P/Bratio?

Earnings Dividends 2010E 388.0 115.0 2011E 570.0 160.0 2012E 599.0 349.0 2013E 629.0 367.0 2014E 660.4 385.4

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