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11. Foodsco Incorporated (FI), a leading distributor of food products and materials to restaurants
and other institutions, has a remarkably steady track record in terms of both return on equity and
growth. At year-end 2007, FI had a book value of $30 per share. For the foreseeable future, the
company is expected to achieve a ROE of 15 percent (on trailing book value) and to pay out one-
third of its earnings in dividends. The required return is 12 percent. Forecast FIs residual income
for the year ending December 31, 2012.

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  • 1. 11. Foodsco Incorporated (FI), a leading distributor of food products and materials to restaurants and other institutions, has a remarkably steady track record in terms of both return on equity and growth. At year-end 2007, FI had a book value of $30 per share. For the foreseeable future, the company is expected to achieve a ROE of 15 percent (on trailing book value) and to pay out one- third of its earnings in dividends. The required return is 12 percent. Forecast FIs residual income for the year ending December 31, 2012.