Sophia is trying to value AALI.JK using residual income method. As of 21 Oct...
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Sophia is trying to value AALI.JK using residual income method. As of 21 October 2022, the share price for AALI.JK is IDR 8,750. Exhibit 1 shows Sophia’s projection.
Exhibit 1. Sophia’s
Before making the projection, Sophia has already calculated the cost of equity for AALI using the following variables :
Beta : 1.23
Risk-free rate : 4.75%
Equity Risk Premium : 6.12%
Sophia shows her valuation to her superordinate, Samuel. When Samuel knows that Sophia uses , he asks Sophia whether the clean surplus relationship is fulfilled. He then checks the price to book ratio of AALI.JK. He finds that the price to book value for AALI.JK is 0.76. Samuel then asks Sophia whether it is appropriate to use
Calculate the fair value of AALI at the end of 2022 using Sophia’s assumptions above! Take into account 0.65 persistence factor.