Question: As discussed in the chapter, abnormal earnings ( AE ) are AE _ ( t ) = x _ ( t ) - ( r
As discussed in the chapter, abnormal earnings AE are AEtxtretimes BVt where xt is the firm's net income, re is the cost of equity capital, and Bvt is the book value of equity at t Following are xtBVt and re for two firms. Required: Calculate each firm's AEt each year from X to XRound your final answers to the nearest whole dollar. Negative abnormal earnings should be indicated with a minus sign. Was Company B better managed over the XX period? Is Company B likely to be the better stock investment in X and beyond?
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