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As discussed in the chapter, abnormal earnings (AE) are AE t = X t (r e BV t1 ) where X t is the firm's

As discussed in the chapter, abnormal earnings (AE) are

AE_t= X_t (r_e BV_t1)

whereX_tis the firm's net income,r_eis the cost of equity capital, andBV_t-1is the book value of equity att 1.

Following areX_t,BV_t-1, andr_efor two firms.

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