Suppose today is the end of year 2020, and you are given the following information on the common stock of XYZ Inc. (the 2021 and 2022 numbers are estimates):

	2020	2021	2022
EPS		40	50
DPS		10	10
BPS	???	???
Residual earnings	10	???
Abnormal earnings growth		20

1. Assume that XYZs cost of equity is 10%. Calculate XYZs book value of equity per share (BPS) for 2020 and 2021.

(6 marks)

2. Assume that after 2022, XYZs abnormal earnings growth (AEG) will grow at a constant growth rate of 5% forever. Calculate the intrinsic value per share in early 2021.

(4 marks)

3. Assume that after 2022, XYZs abnormal earnings growth (AEG) will grow at a constant rate forever. Given XYZs current stock price of $1400 per share, what is the market implied forecast of EPS for 2023?

(5 marks)