Sibongile is considering investing in a newly listed company on the JSE, known as Abital Ltd. She comes to you for advice about whether to invest in their bonds or shares, and has collected the following information from the recently published financial statements: Number of outstanding shares 10 000 000 Earnings 25 000 000 Payout ratio 35% Cost of equity 11% Current market price of one share R10 Number of Bonds outstanding 4 000 000 Abital Ltd recently acquired a patent that expires in 3 years. Their earnings are therefore expected to grow at 20% during these 3 years, after which it will decline to a constant 5%. What is the intrinsic value of Abital ltd?
Sibongile is considering investing in a newly listed company on the JSE, known as Abital Ltd. She comes to you for advice about whether to invest in their bonds or shares, and has collected the following information from the recently published financial statements: Number of outstanding shares 10 000 000 Earnings 25 000 000 Payout ratio 35% Cost of equity 11% Current market price of one share R10 Number of Bonds outstanding 4 000 000 Abital Ltd recently acquired a patent that expires in 3 years. Their earnings are therefore expected to grow at 20% during these 3 years, after which it will decline to a constant 5%. What is the intrinsic value of Abital ltd?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Sibongile is considering investing in a newly listed company on the JSE, known as Abital Ltd. She comes to you for advice about whether to invest in their bonds or shares, and has collected the following information from the recently published financial statements:
Abital Ltd recently acquired a patent that expires in 3 years. Their earnings are therefore expected to grow at 20% during these 3 years, after which it will decline to a constant 5%. What is the intrinsic value of Abital ltd?
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