JJG Co.

JJG Co is planning to raise $15 million of new finance for a major expansion of existing business and is considering a rights issue, a placing or an issue of bonds. The corporate objectives of JJG Co, as stated in its Annual Report, are to maximise the wealth of its shareholders and to achieve continuous growth in earnings per share. Recent financial information on JJG Co is as follows: 20X8 20X7 20X6 20X5 Revenue ($m) 28.0 24.0 19.1 16.8 Profit before interest and tax ($m) 9.8 8.5 7.5 6.8 Earnings ($m) 5.5 4.7 4.1 3.6 Dividends ($m) 2.2 1.9 1.6 1.6 Ordinary shares ($m) 5.5 5.5 5.5 5.5 Reserves ($m) 13.7 10.4 7.6 5.1 8% Bonds, redeemable 2015 ($m) 20.0 20.0 20.0 20.0 Share price ($) 8.64 5.74 3.35 2.67 The nominal value of the shares of JJG Co is $1.00 per share. The general level of inflation has averaged 4% per year in the period under consideration. The bonds of JJG Co are currently trading at their nominal value of $100. The following values for the business sector of JJG Co are available: Average return on capital employed 25% Average return on shareholders’ funds 20% Average debt/equity ratio (market value basis) 50% Return predicted by the capital asset pricing model 14% Required: Evaluate the financial performance of JJG Co, and analyse and discuss the extent to which the company has achieved its stated corporate objectives of: (i) Maximising the wealth of its shareholders; (ii) Achieving continuous growth in earnings per share. sir, in this question geometric average growth is calculated for revenue of 18.6% and eps growth of 14.9 %...I am not able to calculate it. How it comes so ?