E14.3. Two-Stage Growth Valuation (Easy) An analyst develops the following pro forms at the end of 2009 for a firm that uses a 9 per- cent burdle rate for its operations (in millions); 2009A 2010E 2011E Operating income $ 782 $ 868 Net operating assets $6,400 6,848 7,190 Net financial obligations 756 Common equity $5,644

a. Forecast the cum-dividend operating income growth rate for 2011.

b. Using the two-stage growth model 14.7, value the equity with a long-term growth rate of 4 percent.

c. What is the forward enterprise price/earnings ratio implied by the valuation?