The current market price of UPS is $59.38, which3 indicates a current P/B of 6.2.

A. Prepare a table that shows the beginning and ending book values, net income, and cash dividends annually for the eight-year period. Also estimate the residual income and the present value of residual income for the eight years.

B. Estimate the value per share of UPS stock using the residual income model.

C. Estimate the value per share of UPS stock using the dividend discount model. How does this value compare with the estimate from the residual income model?

Suppose you are trying to value a company based on the residual income Model. You have collected the following information for the company: The beginning book value per share for year 7 is $15 Earnings per share (EPS) will be 25% of the beginning book value per share for the next 3 years. The company will payout 20% of the EPS as dividend every year. At the end of year 3 , the market price per share will be 7 times the book value per share. You have also estimated that the beta for the company is 1.5, and the risk-free rate and market risk premium are 2.5% and 3% respectively Suppose you are trying to value a company based on the residual income Model. You have collected the following information for the company: The beginning book value per share for year 7 is $15 Earnings per share (EPS) will be 25% of the beginning book value per share for the next 3 years. The company will payout 20% of the EPS as dividend every year. At the end of year 3 , the market price per share will be 7 times the book value per share. You have also estimated that the beta for the company is 1.5, and the risk-free rate and market risk premium are 2.5% and 3% respectively