Calculate each firms abnormal earnings

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Reference no: EM132497396

Below is data for calendar 2019 for two companies.

                        Company A                      Company B

Actual earnings     $ 79,632              $ 176,341

BVt-1                  $ 504,000                 $ 943,000

Cost of equity capital 0.167                      0.175

Required:

Question 1: Calculate each firm's abnormal earnings and indicate which firm was better managed during calendar year 2019.

Reference no: EM132497396

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