Josef Robien, CFA, is valuing the common stock of British Cornucopia Bank (BCB). In this effort, Robien
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Question:
Josef Robien, CFA, is valuing the common stock of British Cornucopia Bank (BCB). In this effort, Robien has made the following assumptions:
Earnings per share (EPS) will be 20% of the beginning book value per share for each of the next three years.
Book value per share is estimated at ?10.62 on December 31,2007.
BCB will pay cash dividends equal to 40% of EPS.
At the end of three years, BCB's common stock will trade at four times its book value.
Beta for BCB is 0.7, the risk-free rate is 4.5%, and the equity risk premium is 5.0%.
Calculate the Value per share of BCB stock using the Residual income model
Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
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