Consider the following information regarding Seek Ltd (ASX:SEK) in Australia Year 0Year 1Year 2 EPS $1.45$1.67DPS $0.61$0.68 Book Value of Share$19.00 Required Equity Return5% Share Price on ASX$21 Required:a) Assuming Seek will close operations in 2 years’ time, value an ordinary share in this companyusing the Residual Income Method.b) Is Seek fairly valued on the ASX? Please explain fully your response.

Consider the following information regarding Seek Ltd (ASX:SEK) in Australia Year 0 Year 1 Year 2 EPS $1.45 $1.67 DPS $0.61 $0.68 Book Value of Share $19.00 Required Equity Return 5% Share Price on ASX $21

Consider the following information regarding Seek Ltd (ASX:SEK) in Australia Year 0 Year 1 Year 2 EPS $1.45 $1.67 DPS $0.61 $0.68 Book Value of Share $19.00 Required Equity Return 5% Share Price on ASX $21

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Consider the following information regarding Seek Ltd (ASX:SEK) in Australia

	Year 0	Year 1	Year 2
EPS		$1.45	$1.67
DPS		$0.61	$0.68
Book Value of Share	$19.00
Required Equity Return	5%
Share Price on ASX	$21

Required:

a) Assuming Seek will close operations in 2 years’ time, value an ordinary share in this company

using the Residual Income Method.

b) Is Seek fairly valued on the ASX? Please explain fully your response.

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