Financial Statement Analysis, Eleventh Edition

In the document lies the financial statement information for Welmark Corporation as of Year 2 and Year 3.

Financial Statement Analysis, Eleventh Edition

Required:

Using the residual income model, prepare a valuation of the common stock of Welmark Corporation as of Year 3 under the following assumptions:

a. Forecast horizon of five years.

b. Sales growth of 10.65% per year over the forecast horizon and 3.5% thereafter.

c. All financial ratios remain at Year 3 levels.

d. Cost of equity capital is 12.5%