Porfirio Rubirosa, CFA, analyzes firms from a residual income perspective for RBP Analytics Group. Rubirosa has gathered the following information regarding Floating Point Router Corporation (FPRC).

Additional information

• FPRC's cost of equity capital(using CAPM) is 12%.
• The company is working on a new project, code name Project X. If Project X goes online, the contract will result in the firm achieving a return on equity of 25% duringthe project's life.
• If Project X does not occur, the firm's current ROE is expected remain constant and the firm's long-term residual income growth rate is expected to be 4%.
• The company does not pay any dividends at this time. If Project X is undertaken, no dividends will be paid for the next three years. If Project X is not undertaken, the firm expects to start paying a dividend in 20X5. Without Project X, the expected dividend payout will be 80% in 20X5 and thereafter.

Current assets $13,437 $14,343 Property, Plant & 29,279 33,251 Equipment Total Assets $42,716 $47,594 Current liabilities $8,294 $8,703 Long-term debt 12,774 12,975 Shareholders'equity 21,648 25,916 Total Liab. And Equity $42,716 $47,594 FPRC Income Statement Cost of Goods Sold 5,645 6,935 Interest Expenses 1,200 1,200 Net Income $3,320 $4,268