SLMA Corp. for the last ten years, has earned and had cash flows of about P600,000 every year. As per the predictions of the company's earnings, the same cash flow would continue for the foreseeable future. The expenses for the business every year is about P500,000 only. Based on the available public information a P4 million Treasury bond has a prevailing return of P40,000 quarterly. Using Capitalization of Earnings approach, assuming SLMA would sell 20% of its shareholdings, what will be the minimum selling price? ANSWER: 2,500,000
SLMA Corp. for the last ten years, has earned and had cash flows of about P600,000 every year. As per the predictions of the company's earnings, the same cash flow would continue for the foreseeable future. The expenses for the business every year is about P500,000 only. Based on the available public information a P4 million Treasury bond has a prevailing return of P40,000 quarterly. Using Capitalization of Earnings approach, assuming SLMA would sell 20% of its shareholdings, what will be the minimum selling price? ANSWER: 2,500,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
SLMA Corp. for the last ten years, has earned and had
earnings, the same cash flow would continue for the foreseeable future. The expenses for the business every year is about P500,000
only. Based on the available public information a P4 million Treasury bond has a prevailing return of P40,000 quarterly.
Using Capitalization of Earnings approach, assuming SLMA would sell 20% of its shareholdings, what will be the minimum selling price?
ANSWER: 2,500,000
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