Solution-Forecasts of net income, For Summer, Inc,

Forecasts of net income

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Reference no: EM131158538

For Summer, Inc, Gandevani's Smart Students at the end of 2014 developed the following forecasts of net income:

	Forecasted
Year	Net Income
2015	$20,856
2016	$22,733
2017	$24,552
2018	$27,252
2019	$29,978

Management believes that after 2019 Summer will grow at a rate of 7% each year. Total common shareholders' was $112,768 on December 31, 2014. Summer has not established a dividend and does not plan to paying dividends during 2015 to 2019. Its cost of equity capital is 12%.

1. Compute the value of Summer on January 1, 2015, using the residual income valuation model. Use the half-year adjustment.

2. What would be Summer residual income in 2017?

3. What would be Summer common shareholders' equity at the end of 2018?

Reference no: EM131158538

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Forecasts of net income

Reference no: EM131158538

Reference no: EM131158538

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