Problem 2: Residual income (18 points) Notable Books (NB) is a family-controlled company that dominates the retail book market. NB has currently book value of $10 per share (Bo = $10), is expected to earn $2.00 forever, and pays out all of its earnings as dividends. Its required return on equity is 12.5 percent. a) Calculate per-share book value for NB for each of the next three years. B2= cat 127/125 (25/01 12.5 x - 5 B= B= X $10 per Share b) Calculate the residual income for NB for each of the next three years. RI = 1042 lits y 2011a.s -10 -5 RI2 = vis 2000 e luss RI3 = 148.316 14,85 ) Based on what you observe in (b), determine the value for the stock of NB using the residual income valuation model. Problem 2: Residual income (18 points) Notable Books (NB) is a family-controlled company that dominates the retail book market. NB has currently book value of $10 per share (Bo = $10), is expected to earn $2.00 forever, and pays out all of its earnings as dividends. Its required return on equity is 12.5 percent. a) Calculate per-share book value for NB for each of the next three years. B2= cat 127/125 (25/01 12.5 x - 5 B= B= X $10 per Share b) Calculate the residual income for NB for each of the next three years. RI = 1042 lits y 2011a.s -10 -5 RI2 = vis 2000 e luss RI3 = 148.316 14,85 ) Based on what you observe in (b), determine the value for the stock of NB using the residual income valuation model