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INV3701 Assignment 02 semester 2 2023 solutions
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Assessment 2Time left 1:13:43
Question 1
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Which one of the following statements is most likely correct?
a.
Valuation is the estimation of firm’s tangible assets value.
b.
Mispricing is the departure of market price from the estimated intrinsic value.
c.
Going-concern value of a company is its value if it were dissolved and its assets sold individually.
Question 2
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,Use the following information for Woodlands Holdings to answer questions 2 to 5.
Residual income will equate to the same value when calculated in two different approaches if we
assume that marginal cost of debt equals the current cost of debt and that the weights used to
calculate capital charge are derived from the book value of debt and equity.
Total assets (which are financed with twice R3 000 000
as much debt capital as of equity capital)
EBIT R525 000
The NOPAT of Woodlands Holdings is R341 250
Before tax cost of debt 10%
Required rate of return 13%
Tax rate 35%
Calculate the net income.
a.
R211 250
b.
, R221 250
c.
R241 250
Question 3
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Use the following information for Woodlands Holdings to answer questions 2 to 5.
Residual income will equate to the same value when calculated in two different approaches if we
assume that marginal cost of debt equals the current cost of debt and that the weights used to
calculate capital charge are derived from the book value of debt and equity.
Total assets (which are financed with twice R3 000 000
as much debt capital as of equity capital)
EBIT R525 000
The NOPAT of Woodlands Holdings is R341 250
Before tax cost of debt 10%
Required rate of return 13%
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