Question

Abbott Lab made $2.80 net income per share last year and paid out $1.30 in dividend....

Abbott Lab made $2.80 net income per share last year and paid out $1.30 in dividend. The company had a book value (or equity) per share of $20.   The market has a risk free rate of 3.1% and market return 11.1%.   Abbott has a historical beta of .90.

-What is the residual income last year?

-Calculate the stock fair value based on Residual Income Model.

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