Question: Calculate the estimated value per share using the Change in Residual Earnings Method : Complete the chart: N 0 1 2 3 2010 2011 2012

Calculate the estimated value per share using the Change in Residual Earnings Method: Complete the chart:

N 0 1 2 3

2010 2011 2012 2013 2014

EPS $3.00 $3.60 $4.10 $5.50

DPS .25 .25 .30 .35

Difference

BPS $15.00

ROCE

Residual Earnings

Change in RE

PV Change RE

PV of CV

Total

Capitalized VPS

________________________________________________________________________

Show RE Calculation: below

RE 2011:

RE 2012:

RE 2013:

RE 2014:

_________________________________________________________________________

The required return is 8% and the growth rate is 2.5% after 2014.

CV uses the (1+ g) adjustment

Complete the Table:

Calculate Value per Share using the change in residual earnings model:

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