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1.Todd Corp. manufactures train components. On January 1, 2011, management provided the following forecast of income...

1.Todd Corp. manufactures train components. On January 1, 2011, management provided the following forecast of income for the next five years:

Year

Forecasted

Net Income

2011

$53,576

2012

$65,853

2013

$77,985

2014

$88,646

2015

$97,672

Thomas' common shareholders' equity was $422,174 on January 1, 2011. The firm does notexpect to pay a dividend during the 2011-2015 period. Thomas' cost of equity capital is 11 percent.

Required:

Compute the value of Todd Company on January 1, 2011, using the residual income valuation model and the half year convention. T. Harp, the CEO of Todd, expects net income to grow at a rate of 6 percent annually after 2015.

*Use excel cell reference

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jeff jeffy answered 1 year ago
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