What will be the expected abnormal earnings of a firm which has earnings of $40,000 with a required equity cost of capital of 10%,when the book value at the beginning of period is $800,000?

Name: What will be the expected abnormal earnings of a firm which has earnings of $40,000 with a required equity cost of capital of 10%,when the book value at the beginning of period is $800,000?
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Question

Quizplus · Accepted Answer

Abnormal earnings = Earnings - (required equity cost of capital × book value)= $40,000 - (.10 × $800,000)= ($40,000)

What Will Be the Expected Abnormal Earnings of a Firm