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Finance and Accounting - Essay Example

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Finance and Accounting

‘000 Rustic plc ?‘000 Market value of stocks (3x10)=30000 (1.62x8)=12,960 ROI 4,500, 2,952, Fixed assets 20,000 20,000 Current Assets 7,000 9,000 Current Liabilities -3,000 -5,000 Net assets 24,000 24,000 Long term debt @ 5% 4,000 8,000 Shareholders’ funds 20,000 16,000 Long-term investment 24,000 24,000 126, 000 108,960 Shareholder Value Added approach to estimation of cash flows for the first 5 years with and assumption of growth of dividends in year 6 onwards at an annual rate of 4% in perpetuity. The cost of capital is estimated at 20% Terminal Value = the NOPAT (t + 1) x (1 - g / ROIC) / wacc - g NOPAT: Net Operating Profits after Taxes ROIC: return on the invested capital total present values 7,526 terminal value 14,663 non operating assets value 500 total value of rustic plc 26688 less debt -2800 equity 19888 outstanding shares 3000 value per share 6.63 2. ...Show more

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Finance and Accounting Name Professor Institution Course Date 1.Dividend valuation model assuming a dividend cover of 2, growth in dividend of 10% per year in perpetuity and assuming a cost of capital of 20% terminology formula Terminal Value FCF ( t + 1 ) / wacc – g t + 1 first year after the forecast period WACC weighted average cost of capital g: growth rate normalized cash flow 45,000 Growth rate expected after the forecast period is 10% WACC 12% total ($ 45,000 x 1.01) / (.12 - .1) = $ 44554 / 0.02 = $ 2227700 It is important to note that the FCF = After Tax Operating Tax Cash Flow - Interest (1 - t ) - PD - RP - RD – E Where: 1…
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