Past paper June 2012, question 4A

EEsther12y ago

I am struggling with the question 4A because I dont understand where he gets the value below: The earnings figure used in the valuation does not include expected earnings growth.If average forecast earnings over the next three years are used ($3·63 million). I though that in order to calculare this we should multiply 3000* (1.03^3). Thanks Esther

John MoffatTutor12y ago#1

To get the average earnings per year, you add up the three years and divide by 3. (3000 + 3600 + 4300) / 3 = 3633

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