Question 1: The following forecasts of earnings per share (EPS) and dividend per share (DPS) were made at the end of 2012. (in dollars)

2013 2014 2015 2016 2017

EPS 3.90 3.70 3.31 3.59 3.90

DPS 1.00 1.00 1.00 1.00 1.00

The firm has an equity cost of capital (cost of equity) of 12% per annum.

Requirement 1: Calculate abnormal earnings growth (in dollars) that is forecast for each year, 2014~2017. (12 points)

Requirement 2: What is the per-share value of the equity at the end of 2012 based on the abnormal earnings growth valuation model? (13 points)