Equity - Must be wrong - Example 4 - Page 383 - Price Multiple

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cipherap15

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For the second part of the question where it asks for the normalized EPS when using the ROE Method
When averaging ROE I have:
(24.7 + 22.4 + 21.8 + 18 + 28.1 + 21.3 + 22.9 )/ 7 <— Average of the ROE’s. There using numbers that make no sense to me.
After that I would multiple by the most recent BV/share which makes sense. But the above part makes no sense. They use 24.7 then then numbers are all different. It’s not in the errata. I cant see myself being wrong here.
Anybody? Thanks.
 
I can’t see the question, or the data… are they using the return on average equity method?
Return / ((Beg. Equity + End Equity) / 2)
 
THere using the Average Equity Method. Book 4
On page 383 of the Equity Book. Example 4. Data is in Exhibit 1 in the question.
 
I don’t have this year’s L2 books… only last year’s.
Edit: I just looked on p. 383 from my L2 equity book from last year. That example is for Taiwan Semiconductor Manufacturing Company. Is that the same one as you’re looking at?
If so, the annual ROEs are given to you… (5.2+7.3+14.4+23.1+21+24.7+19)/7 = 16.386%
Normalized EPS = .16386 x (current BVPS)
 
It’s Taiwanes — ROE numbers are 24.7 + 22.4 + 21.8 + 18 + 28.1 + 21.3 + 22.9 /7 —- Those were the numbers in the ROE row that I used.
In the answer they use 24.7 + 21.5 + 21.4 + 18.1 + 28.2 + 21.8 + 22.4/7 —– Other then the first number, none of the numbers are in the chart given.
But nothing is listed in the Errata.
It’s just plug n play unless I’m doing something real stupid.
 
I remember this problem because it IS in the errata, but not for this particular reason. The closing price of the stock was listed wrong in the body of the vignette, which threw off all my calculations. So when I got solution 2 wrong I didn’t even think to look at how they gathered average ROE because their listed price in the solution (18.21) didn’t match the vignette’s price (17.53).
I’m 99.9% sure you’re going about solving this correctly, but this problem just appears to be a mess altogether.
 
Yeah I saw that mistake in the errata as well but it had nothing to do with the ROE averages. Just a bad question.
 
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