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folowing information is extracted from Company Zs current year annual financial resuts media mpany's earnings per share clocked in at $2.47, up 40 percent from what it earned a year ago." al return in share price for Company Z for the current year is 0.095 (ie, 95% and the return The release: The he market for the current year is 0.035 (i.e., 3.5%). Two analysts have different opinions on the on t Oiomal return in share price for Company Z for the current year, because they use different estimated market model equations for Company Z, as shown below: Analyst A: E(R) 0.033+1.010 x Rm Analyst B: E(R) 0.055+1.210 x Rm Where: E(R) is the expected return for Company Z for the current year; and .Rm is the return on the market for the current year Required Calculate the forecast error in earnings per share for Comp random walk model. Show your workings. (a) r share for Company Z for the current year using the (3 marks) culation of the forecast error in earnings per share in part (a) means (2 marks) (b) Explain briefly what your cal for Company Z. (c) Calculate the abnormal returns in share price for Company Analyst A and Analyst B. Show your workings Z for the current year on behalf of (2 marks) Referring to the Ball and Brown (1968) study, discuss which analyst you agree with more on how Company Z's earnings announcement might affect its share price. (d) (3 marks) folowing information is extracted from Company Zs current year annual financial resuts media mpany's earnings per share clocked in at $2.47, up 40 percent from what it earned a year ago." al return in share price for Company Z for the current year is 0.095 (ie, 95% and the return The release: The he market for the current year is 0.035 (i.e., 3.5%). Two analysts have different opinions on the on t Oiomal return in share price for Company Z for the current year, because they use different estimated market model equations for Company Z, as shown below: Analyst A: E(R) 0.033+1.010 x Rm Analyst B: E(R) 0.055+1.210 x Rm Where: E(R) is the expected return for Company Z for the current year; and .Rm is the return on the market for the current year Required Calculate the forecast error in earnings per share for Comp random walk model. Show your workings. (a) r share for Company Z for the current year using the (3 marks) culation of the forecast error in earnings per share in part (a) means (2 marks) (b) Explain briefly what your cal for Company Z. (c) Calculate the abnormal returns in share price for Company Analyst A and Analyst B. Show your workings Z for the current year on behalf of (2 marks) Referring to the Ball and Brown (1968) study, discuss which analyst you agree with more on how Company Z's earnings announcement might affect its share price. (d)

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