• beta lambda gama
• number of ordinary shares 3 000 000 16 000 000 110 000 000
• market price per ordinary share 0.7 2.4 0.3
• eps 0.09 0.36 0.025
• dividend per share 0.018 0.120 0.020
• growth rate in dividends 12% 10% 9%
• EPS-Forecast 0.1 0.4 0.025
• long term loans ---- 48 250 000 26 350 000
• market price per loans(per R100) ---- 80 60
• Nominal interest rate ---- 7.5% 5%

Your client Miss Emma Khumalo wants to invest in the transport and logistics industry, and she wants to determine the best company that will match her desired average cost of capital. She has identified three companies engaged in the logistics and transport business, and she has approached for advice on the company she can invest in. The long-term capital employed and other information relevant to the identified three companies are as follows:

It is assumed that the redemption dates of the long-term loans are not relevant to this question and that the standard rate of company tax is 28%.

a. Calculate each company's current P/E ratio, earnings yield, dividend yield, and dividend cover. Comment in detail on possible reasons for differences between the P/E ratios of the three companies and indicate the company to be selected based on these ratios.

b. Calculate each company's cost of equity capital and comment on the results obtained and also mention other methods of calculation that might have been used if additional information had been provided.

c. Calculate the weighted-average cost of capital for each company, and comment briefly on the results obtained. Based on your calculations, advise Miss Emma Khumalo on the best company she should consider for her investment.