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On January 1, 1991, you are considering the purchase of ABC Company's common share. You have collected the following information on ABC Company:1.Book value for common share on January 1, 1991 is $13per share.2.Predicted net income for 1991 is $2per share and net income is expected to increase by 10% every year through 1995. 3.ABC is expected to pay $0.5dividends per year from 1991 to 1995.4.After 1995, abnormal earnings will grow by 5% per year.5.ABC's beta is1.2. The risk-free rate of return is6.6% and the market risk premium is 7%. You should use the CAPM model to estimate the equity cost of capital for ABC Company. Required:Using the abnormal earnings formula, compute the estimated equity value per share of ABC Company onJanuary 1, 1991.Your answers must show the steps of computations for any credits. Problem 2 (2 points)Use the stock return data of Walmartand Cisco to estimate their betas. The monthly return data is available in Blackboard.

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On January 1, 1991, you are considering the purchase of ABC Company's common share. You have collect...

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