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What is the residual earnings per share

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Below is a partial Pro-forma for Ferrari Limited. The current year is 2020, EPS and DPS for 2021-2023 are consensus estimates. Book Value of the firm is $5,500,000 and it has 500,000 shares outstanding at the end of 2020. Assume the required rate of return is 7.5% and the firm has no debt.

           2021          2022       2023

EPS    5.00            4.00        3.50

DPS   1.15            3.00       2.00

Problem 1: What is the Book Value per share in 2022?

Problem 2: What is the Residual Earnings per share in 2023?

Problem 3: If residual earnings is expected to be constant after 2023, what would the continuing value be in 2023?

Problem 4: What is the value of the stock in 2020 (VEO )?

Problem 5: The current market price of the stock is $50. What is the premium (or discount) over the market price in dollars per share?

Reference no: EM132930777

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