11-4 (60 minutes) Use the data from Christy Company in the chapter to answer the following a. Calculate Christy Company's residual income for each of Year 1 through Year 5. b. Use the accounting-based equity valuation model to estimate the value of Christy's equity at January 1 of each of Year 2 through Year 5. c. The chapter's discussion of Christy Company assumes that accounting for book value is not conservative. How does the use of conservative accounting principles affect the accounting- based valuation task? d. Use the PB formula to determine the PB ratio at January 1 of each of Year 2 through Year 5. e. Use the PE formula to determine the PE ratio at January 1 of each of Year 3 through Year 5. a. Residual Income Computation Year 1: $12,500 - (.15)($50,000) = $5,000 Year 2: $11,700 - (.15)($56,500) = $3,226 [5,000]* [3,225]* Year 3: $11,420 - (.15)($63,845) = $1,845 [1,843]* Year 4: $11,860 - (.15)($72,145) = $1,039 [1,038]* [ -2]* Year 5: $10,820 - (.15)($72,145) = $ 0 *Note: Consistent with the example in the text, the figures are based on rounding ROCE two digits. The figures without rounding are reported in parentheses.