Question: Question 2 (4 marks). David Smith is evaluating the expected residual income for Scottish Power (London Stock Exchange: SPW). Smith determines that SPW has

Question 2 (4 marks). David Smith is evaluating the expected residual income

Question 2 (4 marks). David Smith is evaluating the expected residual income for Scottish Power (London Stock Exchange: SPW). Smith determines that SPW has a required rate of return of 8 percent. He obtains the following data from Thomson Financial as of 4 March 2002: Current market price: GBP4.00 Book value per share: GBP3.41 Consensus annual earnings estimates March 2002: GBP0.33 March 2003: GBP0.39 Annualized dividend per share: GBP0.26 What is the forecast residual income for fiscal years ended March 2002 and March 2003?

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