Data MARKET VALUE 45000 

  BOOK VALUE 20000  

 P/B 2.25  

 EARNINGS 3000   

P/E 15.00   

DIVIDENDS 750

   # Shares Out 2000   

Forecast EPS grows after Yr2 7.0%       

  r 8%   

GDP growth 3.0%  

 Industry Growth 4.0% 

Based on the data above, please estimate:

RE for Years 1-3; 

Continuing RE at Yr3 using three differential g rates (RE growth, GDP growth, industry Growth); 

Please consider a rounding of two decimal points (e.g. 6.7912 is 6.79 or 15.5678% is 15.57%)

Answer the following question in the space below: 

Q5. 1. Estimate the growth rate (g) implied in the estimation of continuing value so that current price (P) is justified based on the Residual Earnings model 

Answer rating: 100% (QA)

To estimate RE for Years 13 we can use the Residual Earnings RE model RE Earnings PB Book Value Shares Out For Year 1 we have RE1 3000 225 20000 2000 ... View the full answer