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    Abnormal Earnings growth valuation and target prices

    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. Calculate 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?

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    https://brainmass.com/business/finance/abnormal-earnings-growth-valuation-target-prices-191947

    Solution Preview

    Attached is the Excel file with the computations and formulas.

    2006 2007 2008 2009 2010 2011
    EPS $3.90 $3.70 $3.31 $3.59 $3.90
    Growth ...

    Solution Summary

    Abnormal earnings growth valuation and target prices are examined. The earnings are calculated for the year 2008-2011.

    $2.49

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