Exam (elaborations)
INV3701 Assignment 2 Semester 2 2023
Whether used for exam preparation or as a supplementary learning aid, this document equips students with the tools they need to succeed academically in this unit
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
1 review
By: mkhebesinomvuyo • 1 month ago
Good....I got good marks
By: GeniusGears • 1 month ago
Glad to hear you found the material helpful. Keep acing it
Content preview
INV3701ASSIGNMENT 2 SEMESTER 2 2024
,
,Calculations
Current FCFF (1+growth rate) 9.2(1+0.06)
Total value of Greek manufacturing = (WACC−growth rate)
= (0.093−0.06) = 295.52 million
Total value of equity = Total value of firm – Total value of debt
Total value of equity = 295.52 – 132.5 = 163.02 million
,For any assistance Call/WhatsApp: 066 077 8000
Calculations
WACC = (Wd x Kd (1-Tax rate)) + (We x Ke)
WACC = (0.25 x 8.4) + (0.75 x 13.11) = 11.93%
Where, Ke = Rf + Beta (Rm – Rf)
Ke = 6.4% + 1.1 (12.5 – 6.4) = 13.11
Calculations
Expected FCFF
Value of the firm = (WACC−growth rate)
Since WACC is 13.11,
205 762
Value of firm = (0.1311−0.056) = R2 739 840
,Calculations
Terminal Value = E2 x Industry P/E
Terminal value = 2.40 x 28 = 67.20
,For any assistance Call/WhatsApp: 066 077 8000
Calculations
Normalised Earnings per share = Average ROE of the previous full cycle x Current book value per
share
Normalised Earnings = 0.32 x 14 = 4.48
,Calculations
EVA = NOPAT – WACC (TOTAL CAPITAL)
EVA = 120 – 0.0506 (88 + 94)
EVA = 110.79
,For any assistance Call/WhatsApp: 066 077 8000
Calculations
Required return = 6 + 1.25 (9.5) = 17.875%
,Calculations
ROE−g 0.32−0.04
P/B = r−g
= (0.1788−0.04) = 2.02
E
( )(1−b)(1+g) (0.19)(1.049007692)(1.04)
S
P/S = r−g
= 0.1788−0.04
= 1.49
To have the retention ratio we make use of the trailing P/E ratio
(1−b)(1+g)
Trailing P/E = r−g
1−b(1.04)
7.86 = 0.1788−0.04
1.090968 = (1-b)(1.04)
1 – b = 1.049007692
, For any assistance Call/WhatsApp: 066 077 8000
Calculations
(ROE−r )
Value of share = B0 + ( r−g
) x B0
0.2390−0.14
Value of share = 88 + ( 0.14−0.0580 ) 88 = R194.24
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller GeniusGears. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R87,28. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
78998 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now