Damiano Maggi is valuing Yummy Doughnuts (YD), a company that sells a variety of doughnuts through both companies- owned locations and franchise locations. Damiano has made the following assumptions: Book value per share is estimated at $9.62 on 31 December 2022. EPS will be 22 percent of the beginning book value per share for the next three years. Cash dividends paid will be 30 percent of EPS. The beta for YD is 0.60, the risk-free rate is 5.00 percent, and the equity risk premium is 5.50 percent. The current market price of YD is $59.38, which indicates a current P/B ratio of 6.2. Based on this information answer the questions below. 1. Estimate the residual income and its present value for the next three years.
Damiano Maggi is valuing
Yummy Doughnuts (YD), a company that sells a variety of doughnuts through both companies-
owned locations and franchise locations. Damiano has made the following assumptions:
Book value per share is estimated at $9.62 on 31 December 2022.
EPS will be 22 percent of the beginning book value per share for the next three years.
Cash dividends paid will be 30 percent of EPS.
The beta for YD is 0.60, the risk-free rate is 5.00 percent, and the equity risk premium
is 5.50 percent.
The current market price of YD is $59.38, which indicates a current P/B ratio of 6.2.
Based on this information answer the questions below.
1. Estimate the residual income and its present value for the next three years.
Please do not provide handwritten solution thnku
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