The given numbers were calculated from the financial statements for a firm for 2006
2006 2005
Return on common equity (roce) 15.2% 13.3%
Average common equity (millions) 4756 4173
Required return for equity 10% 10%
Calculate residual earnings for both 2006 and 2005 and explain how much of the change in residual earnings from 2005 to 2006 was due to ROCE and how much was due to the change in common equity.