5.The following forecasts of earnings per share (EPS) and dividend per share (DPS) were made at the end of 2007 for Company ABC:
2008E 2009E Next Three Years
EPS 4.35 5.23 Growth at 11%
DPS 0.55 0.68 Growth at 11%
A.Forecast residual earnings for each of the years, 2008 - 2012.
B.Forecast abnormal earnings growth for each of the years, 2009 - 2012.
Attached Excel file contains all the detailed computations to arrive to the answers. You can see all the formulas used if you click in each cell. All cells are colored based on their role in the ...
This solution shows step-by-step calculations to forecast residual and abnormal earnings for growth in specific years by also taking into account the book value of common equity and return for equity.