The directors of Simat plc have adopted a policy of expansion based on the acquisition of other businesses. The special projects division of Simat has been given the task of identifying suitable businesses for takeover.

Stidwell Ltd has been identified as being a suitable business and negotiations between the board of directors of each business have begun. Information relating to Stidwell Ltd is set out below:

Required:

Calculate the value of an ordinary share of Stidwell Ltd using each of the following valuation methods:

(a) net assets (liquidation) basis

(b) dividend yield

(c) price/earnings ratio.

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Statement of financial position as at 31 May Year 9 ASSETS Non-current assets (at cost less depreciation) Property Plant and machinery Motor vehicles Current assets Inventories Receivables Cash Total assets EQUITY AND LIABILITIES Equity Ordinary £0.50 shares Retained earnings Non-current liabilities 10% loan notes Current liabilities Payables and accruals Total equity and liabilities CH 180,000 90,000 19,000 289,000 84,000 49,000 24,000 157,000 446,000 150,000 114,000 264,000 140,000 42,000 446,000