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How do estimate the value of each share

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Reference no: EM132960013

On 30 June 2021 you obtained the following information for J Ltd:

  • The estimated company cost of capital under an imputation system of tax to be applied to cash flows after tax is 10% (assuming the effective tax rate is 30%)
  • The number of shares outstanding 231.46 million
  • The net debt reported in the statement of financial position (balance sheet) is $141.5 million
  • Federal treasury was forecasting economic growth after COVID-19 of 4.5% for the year ended 30 June 2022.

The free cash flows before tax for the year ended 30 June 2021 are:

Cash receipts from operations $543m

Less cash payments from operations $434m

Less net cash flows investment activities $ 43m

Free Cash flows before tax $ 66m

Required:

Problem 1: Assuming that the free cash flows of J Ltd are sustainable and are expected to grow perpetually at the current forecast long term nominal interest rate, estimate the value of each share.

Reference no: EM132960013

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