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Q1 The following forecast is made for Kallang Ltd EPS (Earnings per Share) DPS (Dividends per Share) 2021 $ 6.00 0.50 2022 S 7.20 0.50 2023 s 8.20 0.50 The ROCE (Retum on Common Equity) for 2021 is 10% The expected market return is 6% and the risk-free retum is 2%. Kallang Ltd has an equity beta of 2. Required: For Kallang Ltd (a) Compute the AEG (Abnormal Eamings Growth) for 2022 and 2023. (10 marks) (b) Compute the normal forward PE (price-earnings) ratio expected as at 1 Jan 2021, (1 mark) (e) Explain whether its forward PE ratio should be higher or lower than the normal forward PE (5 marks) (d) Explain whether its PB (Price-to-Book) ratio at 1 Jan 2021 should be higher, lower or equal to 1. (5 marks) (e) Compute its camnings growth rate (ex-dividend) for 2022 and 2023. (2 marks) (1) Compute its earnings growth rate (cum-dividend) for 2022 and 2023 (this assumes shareholders would reinvest the dividends at the required retum) (2 marks) Q1 The following forecast is made for Kallang Ltd EPS (Earnings per Share) DPS (Dividends per Share) 2021 $ 6.00 0.50 2022 S 7.20 0.50 2023 s 8.20 0.50 The ROCE (Retum on Common Equity) for 2021 is 10% The expected market return is 6% and the risk-free retum is 2%. Kallang Ltd has an equity beta of 2. Required: For Kallang Ltd (a) Compute the AEG (Abnormal Eamings Growth) for 2022 and 2023. (10 marks) (b) Compute the normal forward PE (price-earnings) ratio expected as at 1 Jan 2021, (1 mark) (e) Explain whether its forward PE ratio should be higher or lower than the normal forward PE (5 marks) (d) Explain whether its PB (Price-to-Book) ratio at 1 Jan 2021 should be higher, lower or equal to 1. (5 marks) (e) Compute its camnings growth rate (ex-dividend) for 2022 and 2023. (2 marks) (1) Compute its earnings growth rate (cum-dividend) for 2022 and 2023 (this assumes shareholders would reinvest the dividends at the required retum) (2 marks)

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