Consider the following per-share numbers from the accounting reports of Company A 6/30/20 6/30/19 6/30/21 Estimate EPS 11.69 11.89 8.3 Book Value 28.66 19.6 21.62 per Share Dividend Per Share 2.82 1.97 Beta 

a). Do these numbers in 2020 and 2021 follow clean surplus relations? 

b). What would be the estimate of other comprehensive income in year 2020 and 2021 

c). What is the cost of capital? 

d). Given the data what is the earnings (EPS) that you will expect for 2021? 

e). Given the analysts’ estimate of EPS, what is the estimate of abnormal earnings? 

f). What is the estimate of comprehensive Residual Income Estimate for 2021? 

g). Company A expects a long term growth of 4.7%. Based on this growth rate what will be the Residual Income valuation of Company A? 

h). What will be the Abnormal Earnings growth based valuation of Company A? 

i). Given the data what would be the valuation based on dividend discount? 

j). Given the actual price, what is your conclusion of which method worked better and why?

Answer rating: 100% (QA)

a No these numbers do not follow clean surplus relations These numbers do not follow clean surplus relations because the EPS for 2020 is 1169 and the ... View the full answer