Use the Following Information to Answer the Requirements Required:
A

question 28

Essay

Use the following information to answer the requirements:
$\begin{array}{|c|r|r} & \text { Company X } & \text { Company Y } \\\hline \text { Reported EPS } & \$ 15.00 & \$ 15.00 \\\hline \text { EPS decomposed: } & & \\\hline \text { Permanent } & 75 \% & 65 \% \\\hline \text { Transitory } & 20 \% & 25 \% \\\hline \text { Value-irrelevant } & 5 \% & 10 \%\end{array}$

Required:
a.Use a risk-adjusted cost of capital of 15% to calculate each firm's implied share price and earning multiples.What are the implicit share prices and earnings multiples for the two firms different?
b.Repeat requirement a.,but use a risk-adjusted cost of capital of 8% instead.

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Definitions:

Interaction

A process by which entities or individuals act upon and respond to each other, forming the basis of social relations and structures.

Universal Functionalism

A theory in sociology and anthropology that argues all aspects of a society serve a purpose and are necessary for the survival of that society.

Robert Merton

Robert Merton was an American sociologist known for developing notable theories including the strain theory and concepts such as self-fulfilling prophecy.

Social

Relating to society or its organization, highlighting aspects such as hierarchical structure, interactions, and collective behavior within a community.