Past paper June 2012, question 4A

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May 17, 2014 at 11:29 am #169179
Esther
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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
May 17, 2014 at 3:35 pm #169210
John Moffat
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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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