example given below Tasks: 1. Using the residual income model, prepare a valuation of the common stock

example given below

  

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Tasks: 1. Using the residual income model, prepare a valuation of the common stock of Best Buy as of Year 2 under the following assumptions (use Exhibit 9.6 in the textbook as an example): a. Forecast horizon of five years (years 3 - 7) b. Sales growth consistent with Year 2 over the forecast period and 3.5% thereafter (terminal year). c. All financial ratios remain at Year 2 levels. In other words, you create a model as show in Exhibit 9.6. You can download the "Residual Income Computation Exhibit 9.6" spreadsheet that is posted in module 12 and update it using the BestBuy data. After you have determined the values for year 2, you use the same financial ratios for the forecast horizon. d. Cost of equity capital is 12.5%. All tasks should be answered using excel. You should copy and paste financial information into the template file to be able to link cells to the financial model. Tasks: 1. Using the residual income model, prepare a valuation of the common stock of Best Buy as of Year 2 under the following assumptions (use Exhibit 9.6 in the textbook as an example): a. Forecast horizon of five years (years 3 - 7) b. Sales growth consistent with Year 2 over the forecast period and 3.5% thereafter (terminal year). c. All financial ratios remain at Year 2 levels. In other words, you create a model as show in Exhibit 9.6. You can download the "Residual Income Computation Exhibit 9.6" spreadsheet that is posted in module 12 and update it using the BestBuy data. After you have determined the values for year 2, you use the same financial ratios for the forecast horizon. d. Cost of equity capital is 12.5%. All tasks should be answered using excel. You should copy and paste financial information into the template file to be able to link cells to the financial model.

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The task involves using the Residual Income Model to value the common stock of Best Buy taking into account several assumptions for forecasting future ... View the full answer