Discuss the appropriate method to estimate the current value

Reference no: EM133633503

National Gaming Inc. (National) operates the weekly lottery in the country. National is owned by the country's Finance Ministry. Hence, the operating license is indefinite, and National enjoys tax-free status. The annual net profit of $300 million has been stable for many years, and is expected to remain so. The required return for operations like National's is 10 percent.

National's directors are considering increasing the company's counter sales by raising the gaming payouts. This is expected to take place in 3 years' time. Thereafter, it is estimated that the annual net profit will grow by 5 percent per annum starting in 4 years' time. There is also the risk that net profits may shrink if counter sales do not rise. Hence, analysts pile a risk premium of 2 percentage points on the company

Part 1: Discuss the appropriate method to estimate the current value of National without the change in gaming payouts. Calculate the value.

Part 2: Discuss the appropriate method to estimate the value of National with the change in gaming payouts. Calculate the value.

Part 3: Assume the government privatizes National through the tender sale of 1 billion shares of the company. The change in gaming payout is announced.

Use Part 2's answer to derive the highest bid price per share for the stock of National.

Use Genting Singapore Limited's forward price earnings ratio as proxy to derive the highest bid price per share for the stock of National.

Reference no: EM133633503

Questions Cloud

How much interest will she gain : A time deposit account in a bank yields 5.5% compound interest annually. Jennifer invested P450,000 for 4 years in this savings account How much interest will

Why is the discounted payback period method an improvement : If the maximum allowable discounted payback is 1.5 years, should the company accept the project? b) Why is the discounted payback period method an improvement

Which is the most likely pathophysiology underlying symptoms : A 75-year-old man presents to your office with a three-month history. Which is the most likely pathophysiology underlying his symptoms and findings?

How economic incentives shape human behavior : Does this finding conflict with what you have learned in class regarding how economic incentives shape human behavior?

Discuss the appropriate method to estimate the current value : Discuss the appropriate method to estimate the current value of National without the change in gaming payouts. Calculate the value.

Which finding strongly indicates a peripheral nervous system : A previously healthy 63-year-old woman presents with vertigo. Which findings most strongly indicates a peripheral nervous system lesion to explain vertigo?

Discuss the process of financial planning in the context : Discuss the process of financial planning in the context of the firm and how base case projections are used in the strategic planning process

Evaluate the benefits and the limits of financial ratio : analysis should accompany financial ratio analysis in order to assess more accurately the performance and the strategy of a company

Watch video about representation of native americans in film : What did you learn about the representation of Native Americans as presented in Hollywood films from these short videos?

User Account

All Pages