Abbott Lab made $2.80 net income per share last year and paid out $1.30 in dividend. The company had a book value (or equity) per share of $20. The market has a risk free rate of 3.1% and market return 11.1%. Abbott has a historical beta of .90.
What’s the company’s ROE?
What’s the sustainable growth rate?
What’s the discount rate using CAPM?
Calculate the stock price for Abbott based on Residual Income Model.