Net Asset Valuation – NBC Institute

CR – Nov 2020 – L3 – Q4a – Business Valuation

Determine share value of Anidaso Ltd using multiple valuation methods including net assets, P/E ratio, dividend yield, and discounted cash flow.

Question

Anidaso Ltd operates in the manufacturing industry in Ghana. The company is in the process of selling some of its shares to the general public to raise funds to expand its operations. Below are the financial statements of the company:

Statement of profit or loss for the year ended 30 September, 2019

	GH¢’000
Revenue	122,900
Cost of sales	(58,650)
Gross profit	64,250
Selling, general & administration expenses	(43,570)
Profit before interest & taxes	20,680
Finance cost	(1,680)
Profit before taxation	19,000
Taxation @ 20%	(4,750)
Profit after tax	14,250

Statement of changes in equity (extracts) for the year ended 30 September, 2019

	GH¢’000
Retained Earnings at October 1, 2018	47,970
Profit for the year	14,250
Dividend paid	(6,200)
Retained Earnings at 30 September, 2019	56,020

Statement of Financial Position as at 30 September, 2019

	GH¢’000	GH¢’000
Non-current assets
Development expenditure	13,050
Patents	8,200
Property, plant, and equipment	98,750	120,000
Current assets
Inventories	21,700
Trade receivables	12,501
Bank and cash	5,944	40,145
Current liabilities
Trade payables	(15,400)	24,745
Net current assets	144,745
Non-current liabilities
10% Debenture loan stock	(12,000)	132,745
Equity
Share capital	50,000
Revaluation Surplus	26,725
Retained Earnings	56,020	132,745

Additional relevant information:

The share capital of the company is composed of:
- GH¢000
- 20% redeemable preference shares 10,000
- Ordinary shares (issued @GH¢0.20 each) 40,000
- Total share capital: 50,000
A review of the development expenditure indicated that only 50% of it is worthwhile.
An independent valuer has placed values on some of the assets of Anidaso Ltd below:
- Property, plant & equipment: GH¢111,000
- Inventories: GH¢16,200
- Trade receivables: GH¢10,000
- Total value: GH¢137,200
Profit forecasts for the next five years of Anidaso Ltd are as follows:

Year-end 30 September Profit before Tax (GH¢’000) Depreciation Charge (GH¢’000)

2020 14,900 1,100

2021 16,000 1,225

2022 19,250 1,550

2023 19,800 2,025

2024 21,550 2,130
The patents in the statement of financial position represent a license to produce an improved variety of a product and is expected to generate a pre-tax profit of GH¢10,000 per year for the next five years.
Abiola Limited is a competitor company listed on the Ghana Stock Exchange, and data extracted from its recently published financial statements revealed the following details:
- Market capitalization: GH¢1,000,000
- Number of ordinary shares: 800,000
- Earnings per share: GH¢0.20
- Dividend payout ratio: 80%
The cost of capital of Anidaso Ltd is 10%.

Year-end 30 September	Profit before Tax (GH¢’000)	Depreciation Charge (GH¢’000)
2020	14,900	1,100
2021	16,000	1,225
2022	19,250	1,550
2023	19,800	2,025
2024	21,550	2,130

Required:
Determine the value to be placed on each share of Anidaso Ltd using the following methods of valuation: i) Net assets
ii) Price-earnings ratio
iii) Dividend yield
iv) Discounted cash flow

Answer

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Tags: Business Valuation, Discounted Cash Flow, Dividend Yield, Net Asset Valuation, Price-Earnings ratio, Share Valuation
Level: Level 3

Topic: Business valuations
Series: NOV 2020

CR – Nov 2021 – L3 – Q4a – Business valuations

Determine the value of shares of Aboto Ltd using multiple valuation methods including net assets, price-earnings ratio, dividend yield, and discounted cash flow

Question

Aboto Ltd is a private company in the printing industry. It was established by the Aboto family some twenty years ago with Mrs. Aboto as the Managing Director. The business has grown in size over the years, and the directors are now considering listing the company on the Ghana Stock Exchange. The financial statements of the company for the year 2020 are given below:

Additional Information:

The Share Capital of Aboto Ltd consists of ordinary share capital of no par value issued at GH¢100 per share.
An independent valuer estimated the fair value of the Property, Plant & Equipment at GH¢500,000. Valuation charges of 2% have not been accrued for in the above accounts.
The inventory includes obsolete items worth GH¢5,000 being held despite persistent advice by the auditors to have them written off.
Receivables include an amount of GH¢12,000 resulting from the bankruptcy of a major customer. Aboto Ltd is not likely to realize any amount from this, but the directors have refused to make any provision.
The patents represent a right to sell a special product. This product is expected to generate cash flows of GH¢2,000 per annum indefinitely.
The discounted present value of future cash payments in respect of the debentures is GH¢20,000.
Profits after tax of Aboto Ltd over the past four years were as follows:

Year Profits (GH¢)

2019 38,000

2018 36,000

2017 32,000

2016 30,000
A corporate plan prepared by the directors of Aboto Ltd in 2018 included the following positions:
The price-earnings ratio and a dividend yield of quoted companies in the same industry Aboto Ltd operates are 8 and 4%, respectively.
The net assets of Aboto Ltd as at 31 December 2019 were GH¢251,100.
The cost of capital of Aboto Ltd is 20%.
Investing in unlisted securities is about 20% more risky than investing in listed securities.

Year	Profits (GH¢)
2019	38,000
2018	36,000
2017	32,000
2016	30,000

Required:

Determine the value to be placed on each share of Aboto Ltd using the following methods of valuation:

i) Net assets (4 marks)
ii) Price-earnings ratio (4 marks)
iii) Dividend yield (3 marks)
iv) Discounted cash flow (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Discounted Cash Flow, Dividend Yield, Equity Valuation, Financial Statements, Net Asset Valuation, Price-Earnings ratio, Share Valuation
Level: Level 3

Topic: Business valuations
Series: NOV 2021

CR – Nov 2020 – L3 – Q4a – Business Valuation

Determine share value of Anidaso Ltd using multiple valuation methods including net assets, P/E ratio, dividend yield, and discounted cash flow.

Question

Statement of profit or loss for the year ended 30 September, 2019

	GH¢’000
Revenue	122,900
Cost of sales	(58,650)
Gross profit	64,250
Selling, general & administration expenses	(43,570)
Profit before interest & taxes	20,680
Finance cost	(1,680)
Profit before taxation	19,000
Taxation @ 20%	(4,750)
Profit after tax	14,250

Statement of changes in equity (extracts) for the year ended 30 September, 2019

	GH¢’000
Retained Earnings at October 1, 2018	47,970
Profit for the year	14,250
Dividend paid	(6,200)
Retained Earnings at 30 September, 2019	56,020

Statement of Financial Position as at 30 September, 2019

	GH¢’000	GH¢’000
Non-current assets
Development expenditure	13,050
Patents	8,200
Property, plant, and equipment	98,750	120,000
Current assets
Inventories	21,700
Trade receivables	12,501
Bank and cash	5,944	40,145
Current liabilities
Trade payables	(15,400)	24,745
Net current assets	144,745
Non-current liabilities
10% Debenture loan stock	(12,000)	132,745
Equity
Share capital	50,000
Revaluation Surplus	26,725
Retained Earnings	56,020	132,745

Additional relevant information:

The share capital of the company is composed of:
- GH¢000
- 20% redeemable preference shares 10,000
- Ordinary shares (issued @GH¢0.20 each) 40,000
- Total share capital: 50,000
A review of the development expenditure indicated that only 50% of it is worthwhile.
An independent valuer has placed values on some of the assets of Anidaso Ltd below:
- Property, plant & equipment: GH¢111,000
- Inventories: GH¢16,200
- Trade receivables: GH¢10,000
- Total value: GH¢137,200
Profit forecasts for the next five years of Anidaso Ltd are as follows:

Year-end 30 September Profit before Tax (GH¢’000) Depreciation Charge (GH¢’000)

2020 14,900 1,100

2021 16,000 1,225

2022 19,250 1,550

2023 19,800 2,025

2024 21,550 2,130
The patents in the statement of financial position represent a license to produce an improved variety of a product and is expected to generate a pre-tax profit of GH¢10,000 per year for the next five years.
Abiola Limited is a competitor company listed on the Ghana Stock Exchange, and data extracted from its recently published financial statements revealed the following details:
- Market capitalization: GH¢1,000,000
- Number of ordinary shares: 800,000
- Earnings per share: GH¢0.20
- Dividend payout ratio: 80%
The cost of capital of Anidaso Ltd is 10%.

Year-end 30 September	Profit before Tax (GH¢’000)	Depreciation Charge (GH¢’000)
2020	14,900	1,100
2021	16,000	1,225
2022	19,250	1,550
2023	19,800	2,025
2024	21,550	2,130

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business Valuation, Discounted Cash Flow, Dividend Yield, Net Asset Valuation, Price-Earnings ratio, Share Valuation
Level: Level 3

Topic: Business valuations
Series: NOV 2020

CR – Nov 2021 – L3 – Q4a – Business valuations

Determine the value of shares of Aboto Ltd using multiple valuation methods including net assets, price-earnings ratio, dividend yield, and discounted cash flow

Question

Additional Information:

The Share Capital of Aboto Ltd consists of ordinary share capital of no par value issued at GH¢100 per share.
An independent valuer estimated the fair value of the Property, Plant & Equipment at GH¢500,000. Valuation charges of 2% have not been accrued for in the above accounts.
The inventory includes obsolete items worth GH¢5,000 being held despite persistent advice by the auditors to have them written off.
Receivables include an amount of GH¢12,000 resulting from the bankruptcy of a major customer. Aboto Ltd is not likely to realize any amount from this, but the directors have refused to make any provision.
The patents represent a right to sell a special product. This product is expected to generate cash flows of GH¢2,000 per annum indefinitely.
The discounted present value of future cash payments in respect of the debentures is GH¢20,000.
Profits after tax of Aboto Ltd over the past four years were as follows:

Year Profits (GH¢)

2019 38,000

2018 36,000

2017 32,000

2016 30,000
A corporate plan prepared by the directors of Aboto Ltd in 2018 included the following positions:
The price-earnings ratio and a dividend yield of quoted companies in the same industry Aboto Ltd operates are 8 and 4%, respectively.
The net assets of Aboto Ltd as at 31 December 2019 were GH¢251,100.
The cost of capital of Aboto Ltd is 20%.
Investing in unlisted securities is about 20% more risky than investing in listed securities.

Year	Profits (GH¢)
2019	38,000
2018	36,000
2017	32,000
2016	30,000

Required:

Determine the value to be placed on each share of Aboto Ltd using the following methods of valuation:

i) Net assets (4 marks)
ii) Price-earnings ratio (4 marks)
iii) Dividend yield (3 marks)
iv) Discounted cash flow (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Discounted Cash Flow, Dividend Yield, Equity Valuation, Financial Statements, Net Asset Valuation, Price-Earnings ratio, Share Valuation
Level: Level 3

Topic: Business valuations
Series: NOV 2021

Question Tag: Net Asset Valuation

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CR – Nov 2020 – L3 – Q4a – Business Valuation

Determine share value of Anidaso Ltd using multiple valuation methods including net assets, P/E ratio, dividend yield, and discounted cash flow.

Statement of profit or loss for the year ended 30 September, 2019

Statement of changes in equity (extracts) for the year ended 30 September, 2019

Statement of Financial Position as at 30 September, 2019

CR – Nov 2021 – L3 – Q4a – Business valuations

Determine the value of shares of Aboto Ltd using multiple valuation methods including net assets, price-earnings ratio, dividend yield, and discounted cash flow

Additional Information:

CR – Nov 2020 – L3 – Q4a – Business Valuation

Determine share value of Anidaso Ltd using multiple valuation methods including net assets, P/E ratio, dividend yield, and discounted cash flow.

Statement of profit or loss for the year ended 30 September, 2019

Statement of changes in equity (extracts) for the year ended 30 September, 2019

Statement of Financial Position as at 30 September, 2019

CR – Nov 2021 – L3 – Q4a – Business valuations

Determine the value of shares of Aboto Ltd using multiple valuation methods including net assets, price-earnings ratio, dividend yield, and discounted cash flow

Additional Information:

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CR – Nov 2020 – L3 – Q4a – Business Valuation

Determine share value of Anidaso Ltd using multiple valuation methods including net assets, P/E ratio, dividend yield, and discounted cash flow.

Statement of profit or loss for the year ended 30 September, 2019

Statement of changes in equity (extracts) for the year ended 30 September, 2019

Statement of Financial Position as at 30 September, 2019

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CR – Nov 2021 – L3 – Q4a – Business valuations

Determine the value of shares of Aboto Ltd using multiple valuation methods including net assets, price-earnings ratio, dividend yield, and discounted cash flow

Additional Information:

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CR – Nov 2020 – L3 – Q4a – Business Valuation

Determine share value of Anidaso Ltd using multiple valuation methods including net assets, P/E ratio, dividend yield, and discounted cash flow.

Statement of profit or loss for the year ended 30 September, 2019

Statement of changes in equity (extracts) for the year ended 30 September, 2019

Statement of Financial Position as at 30 September, 2019

You're reporting an error for "CR – Nov 2020 – L3 – Q4a – Business Valuation"

CR – Nov 2021 – L3 – Q4a – Business valuations

Determine the value of shares of Aboto Ltd using multiple valuation methods including net assets, price-earnings ratio, dividend yield, and discounted cash flow

Additional Information:

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