abnormal earnings (AE) are

AEt = Xt (re BVt1)

where Xt is the firms net income, re is the cost of equity capital, and BVt-1 is the book value of equity at t 1.

Following are Xt, BVt-1, and re for two firms.

Company A	20X1			20X2			20X3			20X4			20X5
Xt	$	66,920		$	79,632		$	83,314		$	89,920		$	92,690
BVt1		478,000			504,000			541,000			562,000			598,000
re		0.152			0.167			0.159			0.172			0.166

Company B	20X1			20X2			20X3			20X4			20X5
Xt	$	192,940		$	176,341		$	227,700		$	198,900		$	282,964
BVt1		877,000			943,000			989,999			1,020,000			1,199,000
re		0.188			0.179			0.183			0.175			0.186

Required:

Calculate each firms AEt each year from 20X1 to 20X5. (Round your final answers to the nearest whole dollar. Negative abnormal earnings should be indicated with a minus sign.)

Was Company B better managed over the 20X120X5 period?

Is Company B likely to be the better stock investment in 20X6 and beyond?