ABC Co. (ABC) reported a per-share book value of $10.47 in its balance sheet on...
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ABC Co. (ABC) reported a per-share book value of $10.47 in its balance sheet on December 31, 2004. In early 2005, analysts were forecasting consensus earnings per share of $1.71 for 2005 and $1.96 for 2006.
The following information is provided:
i) The value per share in early 2005 is calculated as $23.62. It is forecasted that residual earnings will grow at a long-term GDP growth rate of 4 percent after 2006.
ii) ABC traded at $36 per share in early 2005.
What are the components of this $36 price that are attributable to book value, short-term earnings expectations, and speculation about long-term growth?
a.Book Value = $23.62 , Short Term Earnings = 8.13 , Long term Growth = $10.47
b.Book Value = $10.47 , Short Term Earnings =8.13 , Long term Growth = $ 33.47
c.None of the listed answers
d.
Book Value = $10.47, Short Term Earnings =8.13 , Long term Growth = $18.21
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