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b) You are given the following information for ABB Company. As of year 1, the company's book value is RM80,000 and its cost of capital is 15%. 25,998 Year 1 Year 2 Year 3 Year 4 Year 5 Sales RM135,000 RM130,000 RM130,000 RM120,000 RM160,329 Operating expenses 100,000 90,000 85,000 70,000 119,900 Depreciation 10,000 11,300 12,770 14,430 14,430 Net income 25,000 28,700 32,230 35,570 Dividends 8,000 4,355 3,120 12,700 10,820 Expected Book value 80,000 ROCE 0.313 0.296 0.266 0.236 0.150 Dividends for year 6 and beyond are expected to remain at year 5 level. a) Compute Company's abnormal earnings for year 1 to year 5 (5 marks) b) Use an accounting based valuation model to estimate the value of Company's equity on January 1st of year 1, year 2, year 3, year 4 and year 5 (5 marks) (Total: 25 marks) b) You are given the following information for ABB Company. As of year 1, the company's book value is RM80,000 and its cost of capital is 15%. 25,998 Year 1 Year 2 Year 3 Year 4 Year 5 Sales RM135,000 RM130,000 RM130,000 RM120,000 RM160,329 Operating expenses 100,000 90,000 85,000 70,000 119,900 Depreciation 10,000 11,300 12,770 14,430 14,430 Net income 25,000 28,700 32,230 35,570 Dividends 8,000 4,355 3,120 12,700 10,820 Expected Book value 80,000 ROCE 0.313 0.296 0.266 0.236 0.150 Dividends for year 6 and beyond are expected to remain at year 5 level. a) Compute Company's abnormal earnings for year 1 to year 5 (5 marks) b) Use an accounting based valuation model to estimate the value of Company's equity on January 1st of year 1, year 2, year 3, year 4 and year 5 (5 marks) (Total: 25 marks)

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