As discussed in the chapter, abnormal earnings (AE) are

AE_t = X_t (r_e BV_t1)

where X_t is the firms 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.

Company A	2013			2014			2015			2016			2017
Xt	$	66,920		$	79,632		$	83,314		$	89,920		$	92,690
BVt1		478,000			504,000			541,000			562,000			598,000
re		0.152			0.167			0.159			0.172			0.166

Company B	2013			2014			2015			2016			2017
Xt	$	192,940		$	176,341		$	227,700		$	198,900		$	282,964
BVt1		877,000			943,000			989,999			1,020,000			1,199,000
re		0.188			0.179			0.183			0.175			0.186

Required:

Calculate each firms AE_t each year from 2013 to 2017. (Round your final answers to the nearest whole dollar. Negative abnormal earnings should be indicated with a minus sign.)

Which firm was better managed over the 20132017 period?

Which firm is likely to be the better stock investment in 2018 and beyond?