Question: As discussed in the chapter, abnormal earnings ( AE ) are AE _ ( t ) = x _ ( t ) - ( r

As discussed in the chapter, abnormal earnings (AE) are AE_(t)=x_(t)-(r_(e)\times BV_(t-1)) where x_(t) is the firm's net income, r_(e) is the cost of equity capital, and Bv_(t-1) is the book value of equity at t-1. Following are x_(t),BV_(t-1), and r_(e) for two firms. Required: Calculate each firm's AE_(t) each year from 20X1 to 20X5.(Round 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 20X1-20X5 period? Is Company B likely to be the better stock investment in 20X6 and beyond?
As discussed in the chapter, abnormal earnings (

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