Question #8 (35 Points) An analyst presents you with the following pro forma (in millions of dollars) that gives her forecast of earnings and dividends for 2013-2017. She asks you to value the 1,380 million shares outstanding at the end of 2012, when common shareholders' equity stood at $4,310 million. Use a required return for equity of 10% in your calculations Note: Please add your forecasts to the table below and show your work on a separate sheet] Forecast book value, return on common equity, and residual earnings for each of the years 2013-2017 Forecast growth rates for book value and residual earnings for each of the years 2014- 2017 a. b. c. Forecast growth d. Forecast abnormal earnings growth (AEG Growth). e. Calculate the per-share value of the equity. ANSWER rates for earnings and cum-dividend earnings for each year Earnings Dividends 2013E 2014E 2015E 2016E 729 467 488 215 670 260 699 449 2017E 760.4 485.4 Book Value ROCE RE Growth in BV Growth in RE Earnings Growth Cum-Div Growth AEG Growth Disc Factors 1.10 1.21 1.331 1.464 1.611