Scribd
Upload
79 views6 pages

Assignment 3 Solution

The document outlines a residual earnings valuation model for determining the value per share of a company. It forecasts earnings per share, dividend per share, and book value per share for the next 5 years. It then calculates residual earnings, return on capital employed, and present value for each of the 5 years. The present values are summed for years 1 through 5 and combined with the present value of continuing value beyond year 5 to determine total value per share. The model provides the discount rate, earnings growth rate, and residual earnings growth rate used in the calculations. It then shows the resulting forecasted value per share and targeted price under two different scenarios.

Uploaded by

Adam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
79 views6 pages

Assignment 3 Solution

The document outlines a residual earnings valuation model for determining the value per share of a company. It forecasts earnings per share, dividend per share, and book value per share for the next 5 years. It then calculates residual earnings, return on capital employed, and present value for each of the 5 years. The present values are summed for years 1 through 5 and combined with the present value of continuing value beyond year 5 to determine total value per share. The model provides the discount rate, earnings growth rate, and residual earnings growth rate used in the calculations. It then shows the resulting forecasted value per share and targeted price under two different scenarios.

Uploaded by

Adam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
You are on page 1/ 6

Residual Earnings Valuation

Forecasted EPS
Dividend per Share
Book Value per Share
Residual Earnings
ROCE
Discount Rate
Present Value
Sum PV to Year 5
PV of Continuing Value

VALUE PER SHARE


Discount Rate/Rate of Return
Forecasted EPS Growth Rate
Residual Earnings Growth Rate

Year 0

Year 1

Year 2

Year 3

4.00

4.20
0.84
23.36
2.600
21.00%

4.41
0.88
26.89
2.541
18.88%

4.63
0.93
30.59
2.479
17.22%

0.926

0.857

0.794

2.407

2.179

1.968

20.00

9.93
27.15

$57.08
8.00%
5.00%
2.00%

Year 4

Year 5

Continuing Value

4.86
0.97
34.48
2.415
15.89%

5.11
1.02
38.57
2.347
14.81%

0.735

0.681

0.681

1.775

1.597

27.150

$78.46

Forecasted per-share
Value/Targeted Price

39.892

Residual Earnings Valuation


Forecasted EPS
Dividend per Share
Book Value per Share
Residual Earnings
ROCE
Discount Rate
Present Value
Sum PV to Year 5
PV of Continuing Value

VALUE PER SHARE


Discount Rate/Rate of Return
Forecasted EPS Growth Rate
Residual Earnings Growth Rate

Year 0

Year 1

Year 2

Year 3

4.00

4.20
0.84
23.36
2.600
21.00%

4.41
0.88
26.89
2.541
18.88%

4.63
0.93
30.59
2.479
17.22%

0.926

0.857

0.794

2.407

2.179

1.968

20.00

9.93
19.96

$49.89
8.00%
5.00%
0.00%

Year 4

Year 5

Continuing Value

4.86
0.97
34.48
2.415
15.89%

5.11
1.02
38.57
2.347
14.81%

0.735

0.681

0.681

1.775

1.597

19.963

$67.90

Forecasted per-share
Value/Targeted Price

29.332

You might also like