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John Moffat.
John Moffat.-
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syedmushahid
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Hello sir
Question in Kaplan kit:
Using equity market valueOrdinary shares of 7.8m have a nominal value of $0.25 and currently traded at ex div price 7.10.ANd economic recovery expects a share price growth of 8% in foreseeable future.
According to me calculation should be like this
7.8/0.25= number of shares 31.2
31.2x 7.1(ex div price) x 1.08 (growth rate).
But in solution they did not count growth rate and simply calculate 31.2×7.1
Why?
John Moffat
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I do not have the Kaplan Kit (only the BPP Kit) and so without seeing the whole question I cannot help you (you have not said what the question requires).
If it is labelled as a past exam question then tell me the name and the exam because I have all past exam questions.
syedmushahid
- Topics: 18
- Replies: 35
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Sir it is MCQ section B Business valuation question.
Required:
Sir it asks how will we value the business using equity market value.The question is
Ordinary shares of 7.8m have a nominal value of $0.25 and currently traded at ex div price 7.10.ANd economic recovery expects a share price growth of 8% in foreseeable future.Sorry to bother you again
John Moffat
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Again, I need to see the whole question.
However, if the 7.8m is the total nominal value in $’s, then there are 31.2m shares in issue and the current market value of the shares is 31.2 x $7.10 = $221.52.
syedmushahid
- Topics: 18
- Replies: 35
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yes this is what answer is in the solution. So growth in share is not incorporated when determining the value of the business on the basis of equity shares.
RightJohn Moffat
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The current market value will already take into account expected future growth.
syedmushahid
John Moffat- You must be logged in to reply to this topic.