Determine the equity value of ge

Reference no: EM131306668

Problem -

Using the following proforma information regarding GE, Inc. based on analysts' forecast in early 2016:

	2016E	2017E	Next 3 years
EPS	1.29	1.56	Growth at 7.59%
DPS	0.92	1.11	Growth at 10%

The book value of GE's common equity as of 6/18/16 was $128,159 million with 10,080 million shares outstanding. Use a required return for equity of 14.92% for calculations.

Required:

a. Forecast residual earnings for each of the years, 2016-2021.

b. Determine the equity value of GE; assume that earnings will grow at 4% starting from 2021. The current price as of 6/18/16 is $30.60. Should we buy the stock?

Reference no: EM131306668

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