The following earnings and dividends forecasts made at the end of 2016 for a firm with $16 book value per common share at that time. The firm has a required equity return of 9%

1)
	2017	2018	2019	2020	2021
EPS	3.26	4.18	3.38	4.32	4.71
DPS	0.78	0.97	1.08	1.17	1.32
Book Value = Prior Year BV + EPS - DPS	18.48	21.69	23.99	27.14	30.53
ROCE = EPS / Prior year BV	20.38%	22.62%	15.58%	18.01%	17.35%
RE = EPS - (Prior year BV x9%)	$1.82	$2.52	$1.43	$2.16	$2.27

[a,Forecast book value per share, return on common equity (ROCE), and residual earnings for each year, 2017-2021.]--Answered

[b. Based on your forecasts, do you think this firm is worth more or less than book value? Why?]-Answered

As we can see in the last row forecasted residual earnings are positive. Therefore the shares of this firm is worth more than the book value

C, Assume that residual earnings will grow at a rate equal to growth in historical GDP

(4%), after 2021. What is the value of one share in the company? -Need help with this one!

Year 2017 2018 2019 2020 2021 RE 1.82 2.52 1.43 2.16 2.27 Discounting Factor 0.92 0.84 0.77 0.71 0.65 0.65 Value 1.67 2.12 1.10 1.53 1.48 30.69 38.59 Terminal Value 7.216 Value of 1 share