Question 2 The following table provides earnings information about two companies, A Ltd and B Ltd: | Current year's total earnings Current year's total shares outstanding Prior year's earnings per share A Ltd B Ltd $595 mil | $148 mil | 100 mil 50 mil $6.50 $3.93 You are also given two different abnormal returns in share price for the current year, -0.026 (i.e., - 2.6%) and -0.017 (i.e., -1.7%), which are calculated from market model equations for A Ltd and B Ltd. Required: (a) Calculate the forecast error in earnings per share for the current year for both A Ltd and B Ltd using the random walk model. Show your workings. (2 marks) (b) Referring to research evidence of the information theory and based on your answer in part (a) of this question, briefly explain which abnormal return in share price you should choose for A Ltd and which abnormal return in share price you should choose for B Ltd, respectively. Assume earnings is the only source of new information in the market. (3 marks) Question 2 The following table provides earnings information about two companies, A Ltd and B Ltd: | Current year's total earnings Current year's total shares outstanding Prior year's earnings per share A Ltd B Ltd $595 mil | $148 mil | 100 mil 50 mil $6.50 $3.93 You are also given two different abnormal returns in share price for the current year, -0.026 (i.e., - 2.6%) and -0.017 (i.e., -1.7%), which are calculated from market model equations for A Ltd and B Ltd. Required: (a) Calculate the forecast error in earnings per share for the current year for both A Ltd and B Ltd using the random walk model. Show your workings. (2 marks) (b) Referring to research evidence of the information theory and based on your answer in part (a) of this question, briefly explain which abnormal return in share price you should choose for A Ltd and which abnormal return in share price you should choose for B Ltd, respectively. Assume earnings is the only source of new information in the market