Calculate the value of equity

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a. DVM valuation A company has the following information available: Share capital in issue: 1 million ordinary shares at a par value of £1. Dividend just paid: £0.20 per share. Current earnings per share (EPS): £0.25. Current return earned on assets: 15% Current equity beta: 1.2 Average market return on shares: 14% Risk free rate: 4% Calculate the market capitalisation of the company.

b. The following information has been taken from the statement of profit or loss and the statement of financial position for X Co: Revenue: £900k Production expenses: £375k Administrative expenses: £290k Tax-allowable depreciation: £35k Capital investment in year: £80k Corporate debt: £100k Corporation tax is 30%, the WACC is 16.5% and inflation is 4%. These cash flows are expected to continue for the foreseeable future. Calculate the value of equity.

Reference no: EM132940354

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