Question: ABC Corp has: Net Income: $ 5 0 0 , 0 0 0 for the year. Book Value of Equity: $ 4 , 0 0

ABC Corp has:
Net Income: $500,000 for the year.
Book Value of Equity: $4,000,000.
Required Cost of Equity: 10%.
The company's residual income is expected to grow at a rate of 5% annually.
You are required to calculate:
The residual income for the current year.
The present value of the firms equity using the residual income model if the residual income grows perpetually at 5%.

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