Qaser Limited has 18 million shares trading at a price of $22.00. The companys financial statements for the year just ended show total assets of $240 million, shareholders equity of $160 million and earnings-per-share of $0.75. The company does not pay dividends. Analysts earnings-per-share forecasts for the next two years are $1.20 and $1.50 respectively. In all of the following calculations assume a zero dividend payout ratio and a required return on the shares of 12%. Required: (a) Calculate residual earnings consistent with the analyst earnings forecasts for each of the next two years. (3 marks) (b) Assuming a growth rate in residual earnings of 4% after the second year, calculate the intrinsic value of the company. (3 marks) (c) Calculate the growth rate in residual earnings after the second year implied by the current market price. (4 marks) (d) Analysts face a number of practical difficulties in estimating a firms intrinsic value which can be resolved by the reverse engineering approach to valuation. Describe these difficulties and explain how they are resolved by the reverse engineering approach. (5 marks) (e) Describe the advantages of using the residual operating income model instead of the residual earnings model for valuation purposes. (5 marks)