Q5. Discounted Abnormal Earnings (AE) Valuation (10 mark) (1) Suppose the AE model information for FBE Inc. is given as follows. 2019 2020F 2021F 2022F Closing Equity 6,500 7,100 7,400 8,000 Net Profit 500 700 900 1,100 Assuming the long-term growth rate of abnormal earnings is 3% and the cost of equity 5%. The present value of the forecasted abnormal earnings in 2021 and 2022 are given as follows. 2021F 2022F 2019 Present value of AE 494.33 630.60 Derive the total value of equity for FBE Inc. in 2019. Show your work. (6 mark) (2) Explain why usually for the same company, the terminal value in AE valuation is significantly lower than that in DCF valuation. (4 mark)