1. calculate the abnormal earnings growth for each year, Ask an Expert

Accounting

The following forecast of earnings per share (EPS) and dividend per share (DPS) were made at the end of 2006:

2007E 2008E 2009E 2010E 2011E
EPS 3.90 3.70 3.31 3.59 3.90
DPS 1.00 1.00 1.00 1.00 1.00

The firm has an equity cost of capital of 12% per annum.

1. find out the abnormal earnings growth for each year 2008 - 2011.

2. What is the per-share value of the equity at the end of 2006 based on the abnormal earnings growth valuation model?

3. What is the expected P/E for 2011?

4. What is the forecasted per-share value of the equity at the end of the year 2011?

5. the stock is trading at $ 20. Make and justify a recommendation as to whether the shares should be purchased?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M976783

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