Use the data from Christy Company in the chapter to answer the following:
a. Calculate Christy Company’s residual income for each of Year 1 through Year 5.
b. Use the accounting-based equity valuation model to estimate the value of Christy’s equity at January 1 of each of Year 2 through Year 5.
c. The chapter’s discussion of Christy Company assumes that accounting for book value is not conservative. How does the use of conservative accounting principles affect the accounting-based valuation task?
d. Use the PB formula to determine the PB ratio at January 1 of each of Year 2 through Year 5.
e. Use the PE formula to determine the PE ratio at January 1 of each of Year 3 through Year 5.