Question: Reverse Engineering with the Abnormal Earnings Growth Model (Medium) Analysts forecast forward earnings of$2.1 l per share and a forecast of $2.67 for two years ahead. The firm pays no dividends. The required return is 9 percent.
a. What is the long-term growth rate in abnormal earnings growth (AEG) implied by a market price of$105.69?
b. What is the market forecast of EPS for three years ahead?