1) Calculate the value of ABC using a residual income model if the current book value is $140 billion.

- The cost of equity per CAPM is 9%; Shares outstanding is 5 billion.

-The earnings for the next 3 years will be 70 billion, 75 billion, 79 billion

-The dividends expected for the next 3 years are 14 billion, 16 billion, and 18 billion

-The residual earnings will increase at a constant rate of 2.5% in year 4 and beyond.

-Remember to convert everything to a per share basis!