Question (I had to look this topic up to review): Given the following information, calculate the normalized EPS using the method of average return on equity. 2000 ROE: .12 2001 ROE: .09 2002 ROE: .15 2003 ROE: .21 2000 BVPS: $40 2001 BVPS: $30 2002 BVPS: $35 2003 BVPS: $45 A. 6.41 B. 7.02 C. 9.45 D. 5.34
A. kind of a vague questions, isn’t it?
A? Seems to easy though, so I’m waiting to be corrected.
yea A Avg Roe = .1425 multiply by the 2003 BVPS = .1425*45 = 6.41
A. Question not vague but rather straigtforward… I hope! Take avg of ROE times ending BV was my thought process.
You guys are all over it. A is the correct answer. I’m reviewing the mkt valuation section tonight. Seems pretty light but testable… Might have some more problems for yall in a little bit.
Agree with the above.
I would LOVE to see some questions like this on 6/7
be careful on these if the final year NI is an estimate. I think at that point you take the average of all prior years times the ending BV. (I think)
that is what i meant by vague. it feels like there is info missing and the answer i gave (and everyone else) seems too easy and straightforward. i’m probably being paranoid.
i totally remember getting hosed on a question because I accidetally used an estimate in the average ROE calc., but I can’t find it. I can almost 100% gurantee it was from Schweser, because that is their MO.