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MV of equity of Jupiter can be calculated as 50 million shares multiplied by market price of share of 580 cent, why this value is not used in degearing of equity beta of 1.5?
Because the question tells you that the gearing is 12% debt (and therefore 88% equity).
By all means use the total MV of equity, but then you would have to calculate the total value of the debt as well (using the gearing ratio of 12%) and you would end up with exactly the same answer.
You will have to say which bit of the advice you are not clear about.
It is standard practice to consider both the net asset value and the dividend valuation model (depending on the information available in the question). The dividend valuation model relies on the estimate of future dividend growth, which is why the examiners answer has considered different estimates of future growth.
Dear John like you said above if we use Mv of equity i.e 50m shares multiply $5.80 .then we have to calculate Value of debt by gearing of 12%. I am wondering is it possible to calculate Value of debt amount by only % of gearing provided in the question.
If its possible to find Vd amount. Can you please show me the working of how to do it. ?
I don’t really understand why you actually want to do it, but the value of the debt will be 12/88 of the value of the equity.
Thanks John Just wannain to take an idea of how to do it. Well thanks a lot John really
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