McDuck ple a duck sandwich fast food business that has undergone significant growth over the past...

Transcribed Image Text:

McDuck ple a duck sandwich fast food business that has undergone significant growth over the past 5 years. To help its expansion plans, McDuck is considering a takeover of Fab Fries plc. Who specialise in French Fries. Both companies are quoted, and are in the same business sector. The Management of McDuck feel that this acquisition target will complement its business. Financial information for Fab Fries is as follows: Number of ordinary shares Ordinary share price Proposed payout ratio DPS one year ago DPS two years ago Equity beta Other relevant information is as follows: Average sector P/E Risk-free rate of return Return on the market EPS i. Market capitalisation ii. iii. 20 million Required: (a) Calculate the value of Fab Fries plc. using the following methods: Price/earnings ratio method Discuss any problems arising from using the P/E method 4.2% 7 11.6% €3.20 60 cent 50% 18.5 cent 16.5 cent 1.1 (3 marks) (3 marks) (3 marks) McDuck ple a duck sandwich fast food business that has undergone significant growth over the past 5 years. To help its expansion plans, McDuck is considering a takeover of Fab Fries plc. Who specialise in French Fries. Both companies are quoted, and are in the same business sector. The Management of McDuck feel that this acquisition target will complement its business. Financial information for Fab Fries is as follows: Number of ordinary shares Ordinary share price Proposed payout ratio DPS one year ago DPS two years ago Equity beta Other relevant information is as follows: Average sector P/E Risk-free rate of return Return on the market EPS i. Market capitalisation ii. iii. 20 million Required: (a) Calculate the value of Fab Fries plc. using the following methods: Price/earnings ratio method Discuss any problems arising from using the P/E method 4.2% 7 11.6% €3.20 60 cent 50% 18.5 cent 16.5 cent 1.1 (3 marks) (3 marks) (3 marks)

Answer rating: 100% (QA)

To calculate the value of Fab Fries plc using different methods well use the given financial information and relevant data Lets start with the calcula... View the full answer