Question: Residual Earnings Valuation: Black Hills Corp (Easy) Black Hills Corporation is a diversified energy corporation and a public utility holding company. The following gives the firm's earnings per share and dividends per share for the years 2000-2004.

Suppose these numbers were given to you at the end of 1999, as forecasts, when the book value per share was $9.96, as indicated. Use a required return of 11 percent for calculations below.

a. Calculate residual earnings and return of common equity (ROCE) for each year, 2000-2004.

b. Value the firm at the end of 1999 under the assumption that the ROCE in 2004 will continue at the same level subsequently. Would you call this valuation?

c. Based on your analysis, give a target price at the end of2004.