Please, ASAP! Brennan plc is a family run business, which obtained a stock market listing around three years ago. The board is comprised of 75% of members of the founding family. Brennan plc has a current stock market capitalisation of £250 million and the board owns 45% of the issued shares. The net book value of assets held by Brennan plc is £300 million.

Brennan currently enjoys competitive advantage through being a low cost producer and the board feels that this competitive advantage is likely to continue for the next six years. The following information relating to Brennan and the period of competitive advantage is available.

Following the end of the period of competitive advantage, cash flows are expected to remain constant for the foreseeable future.

Brennan plc currently has no long-term debt and holds short-term investments worth £2.5 million. The corporation tax rate is expected to be 17% for the foreseeable future.

Brennan plc has an equity beta of 0.75, the risk free rate of interest is 3% and the return on the market portfolio is 11%.

Brennan plc has a policy of paying out 10% of its post-tax earnings as dividends.

Requirements

Calculate the value of Brennan plc using total value and value for shareholders methodology and comment on the results.

Answer rating: 100% (QA)

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