Reference no: EM133070357
Question 1 - Molier is an unquoted entity with a recently reported aftertax earnings of R3,840,000. It has issued 1 million ordinary shares with nominal value of R0.50 each. A similar listed entity has a P/E ratio of 9. What is the current value of one ordinary share in Molier using the P/E basis of valuation?
R34.56 million
R69.12 million
R34.56
R69.12
Question 2 - Alpha Co reported a profit before interest and tax of R3.5 million in its most recent accounts. The company is mainly equity financed, but has a R2 million bank borrowing on which it pays 10% per year in interest. The rate of corporate income tax is 25%. Assuming that Alpha Co's P/E ratio is 8, what is the value of the company's equity?
R28.0 million
R26.0 million
R19.8 million
R17.8 million
Question 3 - The following data is available for Pop Inc:
P/E ratio: 10
Dividend cover: 4 times
Share capital: R2 million in 25c shares
The dividend is 2c per share
What is the total market price of Pop Inc?
R1.6 million
R6.4 million
R8 million
R64 million
Question 4 - Floom Co reported an earnings per share of R0.33 in its most recent accounts.
It is an unlisted company, so has no quoted share price.
The directors have decided to use Monster Co, a listed company in the same industry, as a proxy in order to try to value Floom Co's shares.Monster Co's share price is R4.55 and its earnings per share in its most recent accounts was R0.55. The directors of Floom Co believe that the price earnings ratio of their company will be 10% lower than the ratio for Monster Co. What is the value of a Floom Co share, using a price / earnings approach?
R2.46
R2.73
R3.00
R4.10
Question 5 - Gus Co, an unlisted company, generated earnings of R45 million last year and is expecting its earnings to be R48 million in the coming year.
The industry average earnings yield, based on similar listed companies, is 12%.
What is the best estimate of Gus Co's equity?
R5.40 million
R5.76 million
R375 million
R400 million