The real Return on investment (ROI) of Agro PLC for the last two years was 18.5%...

 

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The real Return on investment (ROI) of Agro PLC for the last two years was 18.5% and 21.75% respectively while the inflation rate was 4.5% and 5.7% respectively. It is expected that the inflation rate will be 6% forever. Over the last two years the firm's dividends per share was respectively Rs. 15.5 and Rs. 16.85. Agro PLC expects that the real ROI would gradually slowdown up to 8.2% by the end of year 5 and thereafter it would be equals to the firm's real discount rate of 8% per year. The dividend policy of the firm is to pay 40% of earnings as dividends and the firm expects to maintain the same policy in future as well. Determine the Intrinsic value per share today. Based on the above observations show a Excel model to calculate the intrinsic value of a share of Agro PLC. The structure of the model should clearly include the Input, Output areas and the equations necessary for calculation. Note: Please use the Exhibit A to write-down the model or a similar structure that is to an Excel work sheet. (18 Marks) The real Return on investment (ROI) of Agro PLC for the last two years was 18.5% and 21.75% respectively while the inflation rate was 4.5% and 5.7% respectively. It is expected that the inflation rate will be 6% forever. Over the last two years the firm's dividends per share was respectively Rs. 15.5 and Rs. 16.85. Agro PLC expects that the real ROI would gradually slowdown up to 8.2% by the end of year 5 and thereafter it would be equals to the firm's real discount rate of 8% per year. The dividend policy of the firm is to pay 40% of earnings as dividends and the firm expects to maintain the same policy in future as well. Determine the Intrinsic value per share today. Based on the above observations show a Excel model to calculate the intrinsic value of a share of Agro PLC. The structure of the model should clearly include the Input, Output areas and the equations necessary for calculation. Note: Please use the Exhibit A to write-down the model or a similar structure that is to an Excel work sheet. (18 Marks)

Answer rating: 100% (QA)

Exhibit A Input Real ROI 185 2175 Inflation rate 45 57 Dividends per share Rs ... View the full answer