Business Valuations

Question 1

What is the equity value of BMC Co using the average price/earnings ratio to the nearest million?

Answer 1

The answer will be determined by using the latest earnings figure, profit after tax for 2024 at $11.3m and multiply by the PE ratio of 17.

Question 2

What is the value of BMC Co using the Net Realisable Value basis?

Answer 2

Net Assets Value = Assets less liabilities but adjusting for NRV

Question 3

What is the value of BMC Co using the dividend valuation model?

Answer 3

g = (6.5/5.6)^(1/3) - 1 = 0.05

Value = d0 (1+g) / (k – g) = (6.5 x 1.05) / (0.1 – 0.05) = $136.5m

Question 4

Which of the following statements relating to capital market efficiency is/are correct?

Answer 4

In a semi- strong form capital market, fundamental analysis cannot produce abnormal gains.

Question 5

What is the theoretical ex rights price per share (to two decimal places)?

Answer 5

Current share price = 0.5 x 20 = $10 per share

Rights issue price = 10 x 90/100 = $9 per share

Number of shares to be issued = (50m/10)/4 = 1.25m shares

TERP = (10 x 5 + ( x 1.25)/6.25 = $9.80 per share

Question 6

What is the total shareholder return for 20X5?

Answer 6

TSR = 100 x (3.00 - 2.50 + 0.15)/2.50 = 26%