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1. PortePorter, Inc. is a distributor of electrical supplies. Management for the company has developed the following forecasts of net income:
4. Forecasted
5. Year
6. Net Income
7. 2012
8. $17,450
9. 2013
10. $22,500
11. 2014
12. $26,000
13. 2015
14. $21,000
15. 2016
16. $18,500
18. Fred King, CFO of Porter, Inc., expects net income to grow at a rate of 9 percent per year after 2016 and the company's cost of equity capital is 15%. Management plans to pay out all income in dividends and plans to continue this policy into the future. Porter's common shareholders' equity at January 1, 2011 is $100,000.
20. Required:
22. Using the residual income model, compute the value of Porter, Inc. as of January 1, 2012. Use the half-year adjustment.