Below are earnings per share for a firm. Year 0 earnings per share are the actual earnings per share this year. Year 1 and 2 earnings per share are forecasts produced by an analyst. The required rate of return is 7% and the firm does not pay dividends, nor will they pay dividends in the future.

	Year 0	Year 1	Year 2
EPS	4.8	5.2	5.7

Required:

1. Calculate AEG for Year 2 using a pro forma. (5 marks)

1. Calculate the implied growth rate in AEG, if the current market price of the stock is $160. (5 marks)

Using the implied growth rate from part (b), forecast EPS for Year 3, 4 and 5 and produce a graph of EPS growth path from year 1 to 5 with an indicator for both BUY and SELL zones.