Porter,Inc.is a distributor of electrical supplies.Management for the company has developed the following forecasts of net income:
$\begin{array}{lccc}
&\text {Forecasted}\
\text { Year: } &\text {Net Incom}\
2012&\$ 17,450 \
2013&\$ 22,500 \
2014& \$ 21000 \
2015& \$ 18.500 \
\end{array}$

Fred King,CFO of Porter,Inc.,expects net income to grow at a rate of 9 percent per year after 2016 and the company's cost of equity capital is 15%.Management plans to pay out all income in dividends and plans to continue this policy into the future.Porter's common shareholders' equity at January 1,2011 is $100,000.
Required:
Using the residual income model, compute the value of Porter, Inc. as of January 1,2012 . Use the half-year adjustment.

Question

Porter,Inc.is a distributor of electrical supplies.Management for the company has developed the following forecasts of net income:
 $\begin{array}{lccc}
&\text {Forecasted}\
  \text { Year: } &\text {Net Incom}\
2012&\$ 17,450 \
2013&\$ 22,500 \
2014& \$ 21000 \
2015& \$ 18.500 \
\end{array}$
 
Fred King,CFO of Porter,Inc.,expects net income to grow at a rate of 9 percent per year after 2016 and the company's cost of equity capital is 15%.Management plans to pay out all income in dividends and plans to continue this policy into the future.Porter's common shareholders' equity at January 1,2011 is $100,000.
Required:
 Using the residual income model, compute the value of Porter, Inc. as of January 1,2012 . Use the half-year adjustment.

Quizplus · Accepted Answer

The Answer of Porter,Inc.is a distributor of electrical supplies.Management for the company has developed the following forecasts of net income:
 $\begin{array}{lccc}
&\text {Forecasted}\
  \text { Year: } &\text {Net Incom}\
2012&\$ 17,450 \
2013&\$ 22,500 \
2014& \$ 21000 \
2015& \$ 18.500 \
\end{array}$
 
Fred King,CFO of Porter,Inc.,expects net income to grow at a rate of 9 percent per year after 2016 and the company's cost of equity capital is 15%.Management plans to pay out all income in dividends and plans to continue this policy into the future.Porter's common shareholders' equity at January 1,2011 is $100,000.
Required:
 Using the residual income model, compute the value of Porter, Inc. as of January 1,2012 . Use the half-year adjustment.

Porter,Inc Fred King,CFO of Porter,Inc