1 A Question 1 (34 marks) - Company Valuation Ringo plc is planning to take over a smaller private limited company, Stellar Ltd, and needs to value the company, Ringo plc has gathered the following data: Ringo Plc Weighted Average Cost of Capital (WACC) 14% Pricelearnings (P/E) ratio 12 Shareholders' cost of equity 16% Stellar Ltd Current dividend payment 27p Past 5 years dividend payments (earliest first) 15p, 17p. 190, 210 23p Current earnings per share (EPS) 38p Number of ordinary shares in issue 4 milion Requirements: a. Given the information provided above, estimate values for Stellar Ltd using the following valuation methodologies i. P/E ratio and ii. Dividend growth model (16 marks) b. Discuss THREE problems associated with using the above valuation techniques and recommend which value(s) Ringo Pic should use (18 marks) 1 A Question 1 (34 marks) - Company Valuation Ringo plc is planning to take over a smaller private limited company, Stellar Ltd, and needs to value the company, Ringo plc has gathered the following data: Ringo Plc Weighted Average Cost of Capital (WACC) 14% Pricelearnings (P/E) ratio 12 Shareholders' cost of equity 16% Stellar Ltd Current dividend payment 27p Past 5 years dividend payments (earliest first) 15p, 17p. 190, 210 23p Current earnings per share (EPS) 38p Number of ordinary shares in issue 4 milion Requirements: a. Given the information provided above, estimate values for Stellar Ltd using the following valuation methodologies i. P/E ratio and ii. Dividend growth model (16 marks) b. Discuss THREE problems associated with using the above valuation techniques and recommend which value(s) Ringo Pic should use (18 marks)