Reference no: EM132512939
Lennon plc is planning to take over a smaller private limited company, McCartney Ltd, and needs to value the company.
Lennon plc has gathered the following data:
Lennon Plc
Weighted Average Cost of Capital (WACC) 14%
Price/earnings (P/E) ratio 12
Shareholders' cost of equity 16%
McCartney Ltd
Current dividend payment £0.27
Past 5 years' dividend payments (earliest first) £0.15, £0.18, £0.20, £0.22, £0.23
Current earnings per share (EPS) £0.38
Number of ordinary shares in issue 4,000,000
Requirements:
Question 1: Given the information provided above, estimate values for McCartney Ltd using the following valuation methodologies.