What is the value of the firm at the beginning

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Reference no: EM133102102

Question - A firm's selected information is as follows:

 

2020

2021

Sales

$14,000

$15,200

Cost of Goods Sold

10,100

11,150

Gross Profit

$3,900

$4,050

Operating Expenses

1,700

1,800

Operating Income

2,200

2,250

Interest Expense

300

300

Earnings before taxes

1,900

1,950

Less: Taxes

380

390

Earnings after taxes

$1,520

$1,560

Total Assets (beginning-of-the-year)

$20,000

$23,560

Equity (beginning of the year)

12,000

13,520

Debt (beginning of the year)

5,000

6,000

Number of shares

1,000

1,000

Earnings Per Share (EPS)

$1.52

$1.56

Dividend Per Share (DPS)

20¢

25¢

Shareholders' required rate of return

10.0%

10.00%

What is the value of the firm at the beginning of 2020 under the Residual Earnings (RE) model if the RE of 2021 is expected to grow at a constant rate of 4% for an indefinite period? Use up to 4 decimal points, please.

Reference no: EM133102102

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