Selected data are presented below for two companies.
$\begin{array}{lrr}&\text { Company A }&\text { Company B }\
\text { Actual earnings } & \$ 79,632 & \$ 176,341 \
B V_{t-1} & \$ 504,000 & \$ 943,000 \
\text { Cost of equity capital } & 0.167 & 0.175
\end{array}$
Required:
Calculate each firm's abnormal earnings and indicate which firm was better managed during the year in question.

Question

Selected data are presented below for two companies.
$\begin{array}{lrr}&\text { Company A }&\text { Company B }\
\text { Actual earnings } & \$ 79,632 & \$ 176,341 \
B V_{t-1} & \$ 504,000 & \$ 943,000 \
\text { Cost of equity capital } & 0.167 & 0.175
\end{array}$ 
Required:
Calculate each firm's abnormal earnings and indicate which firm was better managed during the year in question.

Quizplus · Accepted Answer

The Answer of Selected data are presented below for two companies.
$\begin{array}{lrr}&\text { Company A }&\text { Company B }\
\text { Actual earnings } & \$ 79,632 & \$ 176,341 \
B V_{t-1} & \$ 504,000 & \$ 943,000 \
\text { Cost of equity capital } & 0.167 & 0.175
\end{array}$ 
Required:
Calculate each firm's abnormal earnings and indicate which firm was better managed during the year in question.

Selected Data Are Presented Below for Two Companies Required: Calculate Each Firm's Abnormal Earnings and Indicate Which Firm

Selected Data Are Presented Below for Two Companies Required:
Calculate Each Firm's Abnormal Earnings and Indicate Which Firm