You are given the following information regarding UFSK limited, a listed entity. •i ea\rmoo Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 91-day Treasury bill rate Market risk premium UFSK Beta Dividend growth rate stable phase 5% Bonds outstanding Par value per bond Semi-annual coupon rate on bonds 6% Bond yield to maturity 60% 6% 8% 1.2 5 000 1000 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information • UFSK limited recently paid a dividend • UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: a) As an investment analyst advise your client how much must she expect to pay for UFSK limited stock. b) Ascertain the market value of UFSK limited equity. c) Determine the fair value of UFSK limited bond d) Determine the total value of the company's debt e) Determine the total value of UFSK limited
You are given the following information regarding UFSK limited, a listed entity. •i ea\rmoo Number of outstanding shares 100 000 Earnings 300 000 Retention ratio 91-day Treasury bill rate Market risk premium UFSK Beta Dividend growth rate stable phase 5% Bonds outstanding Par value per bond Semi-annual coupon rate on bonds 6% Bond yield to maturity 60% 6% 8% 1.2 5 000 1000 8% Bond years remaining to maturity 4 Corporate tax rate 30% Additional information • UFSK limited recently paid a dividend • UFSK recently signed a deal and expects a super normal growth in earnings. The company expects earnings to grow by 8% for the first two years then decline by 2% in the following year, there after a stable growth of 5% is expected into the future. Required: a) As an investment analyst advise your client how much must she expect to pay for UFSK limited stock. b) Ascertain the market value of UFSK limited equity. c) Determine the fair value of UFSK limited bond d) Determine the total value of the company's debt e) Determine the total value of UFSK limited
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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Transcribed Image Text:You are given the following information regarding UFSK
limited, a listed entity.
•i ea\rmoo
Number of outstanding shares
100 000
Earnings
300 000
Retention ratio
91-day Treasury bill rate
Market risk premium
UFSK Beta
Dividend growth rate stable phase 5%
Bonds outstanding
Par value per bond
Semi-annual coupon rate on bonds 6%
Bond yield to maturity
60%
6%
8%
1.2
5 000
1000
8%
Bond years remaining to maturity 4
Corporate tax rate
30%
Additional information
• UFSK limited recently paid a dividend
• UFSK recently signed a deal and expects a super normal
growth in earnings. The company expects earnings to
grow by 8% for the first two years then decline by 2% in
the following year, there after a stable growth of 5% is
expected into the future.
Required:
a) As an investment analyst advise your client how much
must she expect to pay for UFSK limited stock.
b) Ascertain the market value of UFSK limited equity.
c) Determine the fair value of UFSK limited bond
d) Determine the total value of the company's debt
e) Determine the total value of UFSK limited
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