Required rate of return on common equity from requirement

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Reference no: EM131300307

1. Using the required rate of return on common equity from Requirement a (7.5%) as a discount rate, compute the sum of the present value of residual income for Starbucks for Years 1 through 5. = 5 points

2. Using the required rate of return on common equity from Requirement a (7.5%) as a discount rate and the long-run growth rate from Requirement c (3%), compute the continuing value of Starbucks as of the start of Year 6 based on Starbucks’ continuing residual income in Year 6 and beyond. After computing continuing value as of the start of Year 6, discount it to present value at the start of Year 1. = 7.5 points

Comprehensive income esimates: Year 1- 1573, Year 2- 1793, Year 3-2038, Year 4- 2303, Year 5- 2871, Year 6- 2958

Common shareholders equity estimates: Year 1- 5499, Year 2- 6409, Year 3- 7123, Year 4- 8086, Year 5- 9862, Year 6- 10157

Reference no: EM131300307

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