Problem 13.18 and Exhibit 13.6 in Chapter 13 present selected hypothetical data from projected financial statements for Steak 'n Shake for Year +1 to Year +11. The amounts for Year +11 reflect a long-term growth assumption of 3%. The cost of equity capital is 9.34%. The market value of common shareholders' equity in Steak 'n Shake on January 1, Year +1, is $309.98 million.

REQUIREDa. Compute the value-to-book ratio as of January 1, Year +1, using the residual ROCE valuation method.b. Using the analyses developed in Requirement a, prepare an exhibit summarizing the following ratios for Steak 'n Shake as of January 1, Year +1:1. Value-to-book ratio (using the amounts from Requirement a)2. Market-to-book ratio3. Value-earnings ratio, using reported earnings for Year 0 of $21.8 million4. Price-earnings ratio, using reported earnings for Year 0 of $21.8 million5. Value-earnings ratio, using projected earnings for Year +1 of $24.5 million6. Price-earnings ratio, using projected earnings for Year +1 of $24.5 millionc. Use reverse engineering to solve for the long-run growth rate in continuing residual income in Year +11 and beyond that is implicitly impounded in the market value of Steak 'n Shake on January 1, Year +1. Use the 9.34% cost of equity capital and the projected earnings amounts for Year +1 to Year +10 in Exhibit 13.6 before solving for the long-run growth rate in continuing residual income.d. Using the analyses in Requirements a-c, evaluate the extent of the market's mispricing (if any) of Steak 'n Shake

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Exhibit 13.6 Steak 'n Shake Selected Financial Info mation (amounts in millions; allow for rounding) (Problem 13.18) Year +1 Year +2 Year +3 Year +4 Year +5 Year +6 Year+7 Year +8 Year +9 Year +10 Year +11 Common equity, beginning of year $165.8 $1776 $192.0 $2060 $216.6 $2277 $234.2 $2381 $239.4 $255.8 $269.5 53.9 (37.4) 24.5 258 (114) 31.8 (20.8) 36.8 (32.9) Net income 27.6 296 342 395 57.0 58.7 Dividends (12.7) (13.6) (190) (277) (382) (43.3) (50.6) Common equity. endof year $177.6 $1920 $206.0 $2166 $227.7 $2342 $238.1 $2394 $255.8 $269.5 $277.6 Cash flow from operations Cash flow for Investing $ 45.4 $ 512 $ 56.3 $ 615 $ 67.1 $ 729 $ 78.9 $ 852 $ 85.6 $ 924 $ 73.2 (35.2) (41.1) (41.9) (427) (43.5) (444) (45.2) (460) (47.3) (48.1) (22.1) Cash flow for lang term debt Cash flow for dividends (0.5) 20 10 (2.0) (37.4) $ 0.9 (43 3) (12.7) (3.0) (114) (13.6) (190) (20.8) (27.7) (32.9) (382) (50.6) Net change in cash $ 07 0.8 08 0.8 08 0.8 10 1.0 0.5 "The aruts kr Yar +l realtton inaairg ahiname tametand badane dhet anant by the apded keotm th rae of ard ten deing the anantsta te tat dcahfows Arantson th eray efat teefas of ofmedae onparkn