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2. For Summer, Inc, Gandevani's Smart Students at the end of 2014 developed the following forecasts of net income: Forecasted Year Net Income 2015 $20,856

2. For Summer, Inc, Gandevani's Smart Students at the end of 2014 developed the following forecasts of net income:

Forecasted

Year

Net Income

2015

$20,856

2016

$22,733

2017

$24,552

2018

$27,252

2019

$29,978

Management believes that after 2019 Summer will grow at a rate of 7% each year. Total common shareholders' was $112,768 on December 31, 2014. Summer has not established a dividend and does not plan to paying dividends during 2015 to 2019. Its cost of equity capital is 12%.

1. Compute the value of Summer on January 1, 2015, using the residual income valuation model. Use the half-year adjustment. (10 pts)

2.What would be Summer residual income in 2017? (10 pts)

3. What would be Summer common shareholders' equity at the end of 2018? (10pts)

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