On Jan. 1, Year 1, you are considering purchase of Necco Co.’s common stock. Based on your analysis, you have determined that:
Book value at Jan. 1, Year 1 is $60 per share
Forecasted Net Income per share for Years 1 through 5 is $12, $15, $25, $50 and $60, respectively
For Year 6 and thereafter, predicted residual income is $0
The firm does not pay dividends
The cost of capital is 15%
Using the Residual Income model, what would be the value of this stock?
A. |
$97.18 |
|
B. |
$110.37 |
|
C. |
$100.91 |
|
D. |
$113.36 |
|
E. |
$86.31 |
EXCEL FORMULA:
Get Answers For Free
Most questions answered within 1 hours.