Porter,Inc Fred King,CFO of Porter,Inc

question 25

Essay

Porter,Inc.is a distributor of electrical supplies.Management for the company has developed the following forecasts of net income:
$\begin{array}{lccc}&\text {Forecasted}\\ \text { Year: } &\text {Net Incom}\\2012&\$ 17,450 \\2013&\$ 22,500 \\2014& \$ 21000 \\2015& \$ 18.500 \\\end{array}$

Fred King,CFO of Porter,Inc.,expects net income to grow at a rate of 9 percent per year after 2016 and the company's cost of equity capital is 15%.Management plans to pay out all income in dividends and plans to continue this policy into the future.Porter's common shareholders' equity at January 1,2011 is $100,000.
Required:
Using the residual income model, compute the value of Porter, Inc. as of January 1,2012 . Use the half-year adjustment.

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