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Homework Solution - Dell Computer Corporation Abnormal...

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Dell Computer Corporation Abnormal Earnings Evaluation Actual Results Forecasted Results 2000 2001 2002 2003 2004 2005 2006 2007 Beyond 2007 a) Earnings Forecast Reported Earnings Per Share $0.79 $0.46 $0.80 Last Year's Earning Per Share $0.80 $1.00 $1.21 $1.39 $1.60 x (1+Forecasted Earnings Growth) = 1.2500 1.2100 1.1500 1.1500 1.1500 Forecasted Earnings Per Share $1.00 $1.21 $1.39 $1.60 $1.84 b) Equity Book Value Forecasts Equity Book Value (Beginning of Year) $2.08 $2.17 $1.80 $1.89 $2.89 $4.10 $5.49 $7.09 (+) earnings per share 0.79 0.46 0.80 $1.00 $1.21 $1.39 $1.60 $1.84 (+) stock issued (repurchased) (0.70) (0.83) (0.71) 0.00 0.00 0.00 0.00 0.00 (-) dividends per share = 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Equity Book Value (End of Year) $2.17 $1.80 $1.89 $2.89 $4.10 $5.49 $7.09 $8.93 37.98% 21.20% 44.44% 52.91% 41.87% 33.94% 29.14% 25.95% Cost of Capital = Rf + Beta(Rm-Rf) Rf Rm Beta 4.00% 9.50% 1.20 10.6% c) Abnormal Earnings Equity Book Value (Beginning of Year) $2.08 $2.17
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This note was uploaded on 11/11/2011 for the course ACCT 303 taught by Professor Staff during the Summer '11 term at S.F. State.

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