Question: Please type the answer by computer so I can see it clearly, thank you!!!! Shares of EFG Inc. are trading at $65 following the release
Please type the answer by computer so I can see it clearly, thank you!!!!
Shares of EFG Inc. are trading at $65 following the release of financial statements in late 2021. The book value per share (BPS) on the balance sheet was $24.50. Earnings per share (EPS) for 2022 and 2023 were $3.60 and $4.80, respectively, according to the income statement. Assume a fixed dividend payout ratio. The required return of equity is 10 percent.
1(a) Calculate the intrinsic value per share in early 2022 with a forecast that residual earnings will grow at the long-term GDP growth rate of 4% after 2023.
1(b) What is the forecast of the long-term residual earnings growth rate after 2023 that is implicit in the market price?
1(c) Based on the residual earnings model, calculate the market implied forecast of EPS for 2024 and 2025.
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