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Question C.1 In 2008 the shareholders of Boafo Ltd decided to dispose of their shares in the company. The summarized financial statements of Boafo for the year 2008 are given below: Statement of Financial Position as at 31 December 2008 GH

Question C.1 In 2008 the shareholders of Boafo Ltd decided to dispose of their shares in the company. The summarized financial statements of Boafo for the year 2008 are given below: Statement of Financial Position as at 31 December 2008 GH

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Question C.1 In 2008 the shareholders of Boafo Ltd decided to dispose of their shares in the company. The summarized financial statements of Boafo for the year 2008 are given below: Statement of Financial Position as at 31 December 2008 GH<m 10,000 N 146,000 53,500 (32,000) (87,500) + Patents Tangible non-current assets Current assets Current Liabilities Long term loans Stated Capital Income Surplus Profit before Tax Tax Proposed Dividend Retained Profit Statement of profit or loss and other comprehensive income for the year ended 31 December 2008 . . 90,000 ====== 50,000 40,000 · 90,000 · ====== Additional Information The stated capital of Boafo Ltd is made up of 20,000,000 ordinary shares of no par value. The company is not listed. The fair value of tangible non-current assets of Boafo Ltd was GHC290 billion. Current assets include obsolete inventory of GH 16.5 billion. The patents represent a license to produce and sell a special product. This product is expected to generate a pre-tax profit of GH$2 billion per annum over the next five years. GH<m 62,000 20,000 42,000 8,000 34,000 ==== The discounted present value of future cash payments in respect of the long term loan is GH 122 billion. Profits after tax of Boafo Ltd over the past 4 years were as follows: Year GH¢m 2004 28,000 2005 30,000 2006 16,000 2007 36,000 The discount rate of Boafo Ltd is 10% per annum Happy Ltd, a major competitor of Boafo Ltd, is listed with a P/E ratio of 9 and dividend yield of 5.2%
Transcribed Image Text:Question C.1 In 2008 the shareholders of Boafo Ltd decided to dispose of their shares in the company. The summarized financial statements of Boafo for the year 2008 are given below: Statement of Financial Position as at 31 December 2008 GH<m 10,000 N 146,000 53,500 (32,000) (87,500) + Patents Tangible non-current assets Current assets Current Liabilities Long term loans Stated Capital Income Surplus Profit before Tax Tax Proposed Dividend Retained Profit Statement of profit or loss and other comprehensive income for the year ended 31 December 2008 . . 90,000 ====== 50,000 40,000 · 90,000 · ====== Additional Information The stated capital of Boafo Ltd is made up of 20,000,000 ordinary shares of no par value. The company is not listed. The fair value of tangible non-current assets of Boafo Ltd was GHC290 billion. Current assets include obsolete inventory of GH 16.5 billion. The patents represent a license to produce and sell a special product. This product is expected to generate a pre-tax profit of GH$2 billion per annum over the next five years. GH<m 62,000 20,000 42,000 8,000 34,000 ==== The discounted present value of future cash payments in respect of the long term loan is GH 122 billion. Profits after tax of Boafo Ltd over the past 4 years were as follows: Year GH¢m 2004 28,000 2005 30,000 2006 16,000 2007 36,000 The discount rate of Boafo Ltd is 10% per annum Happy Ltd, a major competitor of Boafo Ltd, is listed with a P/E ratio of 9 and dividend yield of 5.2%
Required Describe any three (3) suitable situations that may lead to the valuation of shares Using three (3) methods of valuation, advise the directors of Boafo Ltd on the value to be placed on the ordinary shares
Transcribed Image Text:Required Describe any three (3) suitable situations that may lead to the valuation of shares Using three (3) methods of valuation, advise the directors of Boafo Ltd on the value to be placed on the ordinary shares
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