Value+ is currently estimating the value of its debt and equity instruments and had obtained the following information:Long-term government securities currently trade at a yield of 4.5%Cost of debt was estimated at 6.5% factoring the credit riskiness of Value+60% of its profits are historically recapitalized into the business but this is expected to be at 80% beginning next year as Value+ expands into the Chinese marketCurrent year profit is at Php500,000 and total shareholder's equity is at Php5,000,000 with 100,000 outstanding common sharesShares currently trade at Php54.001. What is the required rate of return when the intrinsic value of the share is Php27?2. What is the expected return of Value+?3. What is the growth rate of Value+?

The expected return is the amount of profit or loss an investor can anticipate receiving on an…

Answered: Value+ is currently estimating the…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

Related questions

Question

100%

Value+ is currently estimating the value of its debt and equity instruments and had obtained the following information:

Long-term government securities currently trade at a yield of 4.5%
Cost of debt was estimated at 6.5% factoring the credit riskiness of Value+
60% of its profits are historically recapitalized into the business but this is expected to be at 80% beginning next year as Value+ expands into the Chinese market
Current year profit is at Php500,000 and total shareholder's equity is at Php5,000,000 with 100,000 outstanding common shares
Shares currently trade at Php54.00

1. What is the required rate of return when the intrinsic value of the share is Php27?

2. What is the expected return of Value+?

3. What is the growth rate of Value+?

Expert Solution