E15.6. Forecasting and Valuation (Medium) The reformulated balance sheet and income statement for a firm's 2009 fiscal year are given below Sales Comprehensive Income Statement Operating expenses Of before stock compensation Stock option compensation Operating income Interest expense Interest income Tax benefit Unrealized gain on investments Losses on put options Comprehensive income ** 3,726 (3,204) 522 (22) 500 (50) 120 (124) 376 Balance Sheet 2009 2008 Net operating assets 3,160 2,900 Net financial obligations 1,290 1,470 Common shareholders' equity 1,870 1,430 At the end of 2009, sales were forecasted to grow at 6 percent per year on a constant asser turnover of 1.25. Operating profit margins of 14 percent (after tax) are expected each year. The firm's tax rate is 35 percent. 2. Forecast return on net operating assets (RNOA) for 2010. h. Forecast residual operating income for 2010. Use a required return for operations of 9 percent.

c. Value the shareholders' equity at the end of the 2009 fiscal year using residual income methods.

d. Forecast abnormal growth in operating income for 2011.

e. Value the shareholders' equity at the end of 2009 using abnormal earnings growth methods

f. After reading the stock compensation footnote for this firm, you note that there are employee stock options an 28 million shares outstanding at the end of 2009. A modi- fied Black-Scholes valuation of these options is $15 each. How does this information change your valuation? g. Forecast (net) comprehensive income for 2010.