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QUESTION 31 PortePorter, Inc. is a distributor of electrical supplies. Management for the company has developed the following forecasts of net income:...

QUESTION 31
  1. PortePorter, Inc. is a distributor of electrical supplies. Management for the company has developed the following forecasts of net income:
  2.  
  3.  
  4. Forecasted
  5. Year
  6. Net Income
  7. 2012
  8. $17,450
  9. 2013
  10. $22,500
  11. 2014
  12. $26,000
  13. 2015
  14. $21,000
  15. 2016
  16. $18,500
  17.  
  18. Fred King, CFO of Porter, Inc., expects net income to grow at a rate of 9 percent per year after 2016 and the company's cost of equity capital is 15%. Management plans to pay out all income in dividends and plans to continue this policy into the future. Porter's common shareholders' equity at January 1, 2011 is $100,000.
  19.  
  20. Required:
  21.  
  22. Using the residual income model, compute the value of Porter, Inc. as of January 1, 2012. Use the half-year adjustment.

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