Question 24 12 An investor begins a business with a $1,000 investment. The company has these results for the first two years: . . Income of $120 in the first year Pays out no dividends in the first year. Income of $120 in the second year Pays out the entire cumulative income of $240 as dividends, and returns the original $1,000 investment. The discount rate for this investment is 10 percent. The PV factors for 10% are: Year 10% 1 0.90909 2 0.82645 Required: 1. What are the abnormal earnings for year 1? 2. What are the abnormal earnings for year 2, keeping in mind that the book value at the beginning of year 2 is the original investment ($1,000) plus the income from year 1(S120) minus the dividends paid in year 1. (zero) [$1,000+$120-50=51,120.)? 3. What is the PV of the two years of abnormal earnings? 4. The total cash in the firm at the end of the year 2 is $1.240. As of the initial investment, what is the present value of the $1.240? 5. How is the present value of the $1.240 related to the present value of the abnormal earnings? HTML Editor BIVA A- IEE311xx, E V CDT 114 12pt Paragraph