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You wish to value the shares of Sunwolves Pty Ltd, which is currently unlisted. The company is considering becoming listed on the JSE but needs your help in determining the initial offering price. The company's only other sources of capital are corporate bonds with a current market value of R3 000 000 and convertible preference shares of R 5 250 000. You have forecast the Free Cash Flow to be R 975 000 for the next financial year (2021) after which it is expected to grow at 8% per annum for the next four years. After that, the cash flows are expected to increase at a constant growth rate of two percent (2%) less than the initial growth rate period. The company has a WACC (Weighted Average Cost of Capital) of 15% and the cost of equity has been calculated at 18%. Required: Q.4.1 Calculate the current value of Sunwolves Pty Ltd using the Free Cash Flow valuation method. (Round off all answers to the nearest whole number.) (10) Q.4.2 Suggest an initial list price per share if 150 000 ordinary shares are in issue.
Mr Joseph, a director at Sunwolves Pty Ltd has questioned why the price/earnings valuation model hasn't been used to value the ordinary shares of Sunwolves Ltd. explain at the price/earning valuation model is. Also explain how you will calculate the price/earnings ratio of a company when you are provided with the earnings attributable to shareholders, the number of shares in issue as well as the market price per share.
One of the company advisors have indicated that instead of listing on the JSE they can also consider making use of a private placement to raise the necessary funds. explain to the board of directors what a private placement is.
The following balances appeared in the books of Broke Ltd as at 31 January 2020 R Land and buildings 5 000 000 Machinery 1 250 000 Inventories 800 000 Trade receivables 550 000 Cash and cash equivalents 300 000 Trade payables 625 000 Other payables 200 000 Bank loans 1 300 000 Ordinary shares (R 5 per share) 5 775 000. A professional valuer has provided the company with the following liquidation percentages (liquidation value is expressed as a percentage of carrying/book value) Trade receivables 60% Inventories 75% Land and buildings 150% Machinery 40% Cash and financial assets: at book value Required: Using the information provided, calculate the liquidation value per share of Broke Ltd.
Calculate the firm's market value capital structure. Do not round intermediate calculations. Round your answers to two decimal places.
Rippard's has a debt ratio of 15%, a total asset turnover ratio of 3.0 and a return on equity (ROE) of 48%. Compute Rippard's net profit margin.
You expect to earn 12% annually on the account. How many years will it take to reach your goal?
using the payback and rate of return methods to make capital investment decisions. suppose smith valley is deciding
What is the yield to maturity of a 16-year bond that pays a coupon rate of 10.57 percent per year, has a $1,000 par value, and is currently priced at $1,193.96?
Armando is buying a car that costs $30,000.00 He is using a 10% down payment, and financing the remainder at 6.9% interest for 7 years. The car value drops 30% the first year, and 20% each year after.
You own $1,500 of City Steel stock that has a beta of 1.60. You also own $6,000 of Rent-N-Co (beta = 1.90) and $5,000 of Lincoln Corporation (beta = 1.00). What is the beta of your portfolio (closest to)?
Who wants to be a millionaire? How much would you have to put away at the end of each year to have $1,000,000 assuming you retire in 40 years and can earn 5% on your money.
As percentage of debt on the balance sheet increases, WACC decreases while financial leverage increases, which makes EPS increase. If this is the case, why don't all firms try to end up with 99.9% debt?
Short term interest rate is more volatile than long-term interest rates, so short-term bond prices are more sensitives to interest rate changes
The other way around: you invest $60 into stocks of L. By combining a stock purchase of U and deposit/loan, provide a optional strategy that provides the same profits.
Discuss and elaborate the decision of investing in bond market based on the forecast of interest rate. What will you do if you expect long-term interest rate to increase in the near future? When will you prefer to invest in if you expect that the ..
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