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Select real years to replace the proforma years indicated as Y0, Y 1

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1. Select real years to replace the proforma years indicated as Y0, Y 1. You can select your years starting from the period 2012 up and including to the year 2020

2013-2018

2. While the company’s earnings have grown by 15% in Y1 this growth is not expected to last. For Year 2 and 3 choose a rate from one of the following rates: 11% or 12% or13% or 14%

11%

3. Choose a required equity rate from one of the following 6% or 7% or 8%

6%

4. From Year 4 onwards the company’s earnings will grow at 1% below your chosen required equity rate.

5% after 4 years

5. Choose your company’s dividend pay-out ratio by selecting either 20% or 30% or 40% of earnings

20%

6. In your question you need to provide the discount values – do not ask your participant to determine these values using the PV formula is Excel.

your question using an abnormal earnings growth valuation

Prepare a complete solution showing all the calculations for your question