Recent financial information of Victoria Falls Company is as follows; TZS 0 0 0 Profit after tax
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Question:
Recent financial information of Victoria Falls Company is as follows;
TZS
Profit after tax earnings
Dividends
Statement of financial position information:
TZS TZS
Noncurrent assets
Current assets
Total assets
Current liabilities
Equity
Ordinary shares TZS nominal
Reserves
Noncurrent liabilities
Bank loan
Bonds TZS nominal
Financial analysts have forecasted that the dividends of Victoria Falls Co will grow in the
future at a rate of per year. This is slightly less than the forecast growth rate of the
profit after tax earnings of the company, which is per year. The finance director of
Victoria Falls Co thinks that, considering the risk associated with expected earnings
growth, an earnings yield of per year can be used for valuation purposes.
Victoria Falls Co has a cost of equity of per year and a beforetax cost of debt of
per year. The bonds will be redeemed at nominal value in six years time. Victoria
Falls Co pays tax at an annual rate of per year and the exdividend share price of
the company is TZS per share.
Required:
Calculate the value of Victoria Falls Co using the following methods:
i Net asset value method
ii Dividend growth model
iii Earnings yield method
Calculate the weighted average aftertax cost of capital of Victoria Falls Co using
market values where appropriate.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date: