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    13 views11 pages

    CHEGG

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    Hòa Minh

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    Download as docx, pdf, or txt
    of 11

    Đọc kĩ đề nhé, thay đổi số liệu đấy

    Question 1) LAF company has retained profit for reinvestment for the last year of
    VND 300 million. The company has paid dividends of VND 200 million and has total
    equity at the end of the year amounting to VND 8,000 million. Previously, LAF
    company issued 180,000 ordinary shares and currently has 60,000 treasury shares.
    If now, ordinary share is sold for VND 100,000/share then what are the ratio of
    market value over book value (MB) and price to earnings ratio (PE)?

    What are the ratio of market value over book value and price to earnings ratio?

    Working:

    Company’s net worth = equity + retained earnings – dividends paid

    Company’s net worth = 8000 + 300 -200

    Company’s net worth = 8100 million

    Book value per share = net worth / shares outstanding

    Book value per share = 8100,000,000 / 180,000

    Book value per share = 45,000


    Ratio of price to book = price / book value

    Ratio of price to book = 100,000 / 45,000

    Ratio of price to book = 2.22

    Ratio of price to earnings = price / earnings per

    Ratio of price to earnings = (100,000 * 180,000) / 300,000,000

    Ratio of price to earnings = (18,000,000,000) / 300,000,000

    Ratio of price to earnings = 60

    Question 2) NT joint stock company has just paid dividend of VND 1,800/share.
    Expected dividend growth rate is 8% pa in the next 3 years and subsequently 5% pa
    to infinity. If the investors require a rate of return of 14% pa from the share of Nam
    Trieu joint stock company then what is the current price of the share?

    What is the price per share?

    Answer) the value of the share is 22,706.93


    Working:

    We find the dividend in next 3 years + terminal value

    Terminal value = D3 *(1+growth rate) / (expected return – growth) %

    Here we shall use perpetual growth rate of 5%

    Then we shall bring the values to present value

    Present value = future value /(1+r)n

    Here r = 14%

    Here is the table

    yea denotatio cash PV of


    r n flows values

    0 D0 1800
    1705.263
    1 D1 1944 2

    1615.512
    2 D2 2099.52 5

    2267.48 1530.485
    3 D3 2 5

    terminal 26453.9 17855.66


    3 value 5 4

    22706.92
    5

    Thus the present value of all these cash flow is 22,706.93

    Thus the value of the share is 22,706.93

    Question 3: Nam Trieu joint-stock company is expected to pay a dividend of


    $2000/share next year. The expected dividend growth rate is 8% pa in the next
    12 years and subsequently 12% pa in the next 10 years and subsequently 7%
    pa in the next 9 years and subsequently 5% to infinity. If the investors require a
    rate of return of 10% pa from the share of Nam Trieu joint-stock company then
    What is the current price of the share?
    Ques 4:Mr. A borrows VND 150 million from a bank at an interest rate of 12%
    pa. The loan and interest rate are repayable in four equal installments starting
    in 1 year after from the borrowing date. What is the amount that Mr. A has to
    pay annually?

    The answers to the given question is provided in the order below

    =Loan*r/(1-1/(1+r)^n)
    =150*12%/(1-1/1.12^4)
    =49.3852 million

    Question 5) Company X currently has debt capital of VND 200 million bearing an
    interest rate of 12% pa and 50,000 ordinary share in issue. The company does not
    have to preference share. The company is subject to income tax at 20%. At an EBIT
    of VND 800 million, what is EPS of the company?

    What is the EPS of the company?

    Answer) the EPS of the company is VND 12,416

    Working:

    Here is the table, we need to find profit after tax.

    Profit before tax = EBIT – interest

    Profit after tax = profit before tax*(1- tax rate)

    EBIT 800

    interest
    @12% 24

    PBT 776
    Tax @ 20% 155.2

    PAT 620.8

    All figures are in $ million

    Thus EPS = profit after tax / shares outstanding

    EPS = 620,800,000 / 50,000

    EPS = 12,416

    Thus the EPS of the company is VND 12,416

    More details for question number 2:


    Dividend in year 1 = dividend already paid *(1+growth rate)

    Here growth in dividends is 8% or 0.08

    Dividend in year 1 = 1800 *(1.08)

    Dividend in year 1 = 1944

    Dividend in year 2 = dividend in year 1*(1+ growth rate)

    Dividend in year 2 = 1944*1.08

    Dividend in year 2 = 2,099.52

    We continue this and dividend in year 3 shall be

    Dividend in year 3 = dividend in year 2*(1+ growth rate)

    Dividend in year 3 = 2099.52*1.08

    Dividend in year 3 = 2,267.4816

    Now terminal value is also found for year 3 itself


    Terminal value = dividend in year 3 *(1+ perpetual growth rate) / (return – perpetual
    growth rate)

    Here perpetual growth rate is 5% or 0.05

    And return rate is 14% or 0.14

    Terminal value = 2,267.48 *(1.05) / (0.14-0.05)

    Terminal value = 2,380.86/ (0.09)

    Terminal value = 26,453.95

    Now we find the present value of these cash flows

    Present value = future value / (1+r)n

    Here r = 14% or 0.14

    Thus for dividend in year 1

    PV of Dividend 1 = 1944 / (1.14)1


    PV of Dividend 1 = 1944 / (1.14)

    PV of Dividend 1 = 1705.26

    PV of Dividend 2 = 2099.52 / (1.14)2

    PV of Dividend 2 = 2099.52 / (1.2996)

    PV of Dividend 2 = 1,615.51

    PV of Dividend 3 = 2267.48 / (1.14)3

    PV of Dividend 3 = 2267.48 / (1.481544)

    PV of Dividend 3 = 1,530.48

    Terminal value calculated is as on year 3

    PV of terminal value = terminal value / (1.14)3

    PV of terminal value = 26,453.95 / 1.481544

    PV of terminal value = 17,855.66


    Now to find the present value of share price we take the sum of all these present
    values

    Present value of share = 1705.26 + 1615.51 + 1530.48 + 17855.66

    Present value of share = 22,706.91

    In this manner we find the value of the share.

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