The directors of TNT Industries have adopted a policy of expansion based on the acquisition of other businesses. The special projects division of TNT has been given the task of identifying suitable businesses for acquisition. Sulu Ltd. has been identified as a suitable business, and negotiations between the boards of directors of both businesses have begun. Information relating to Sulu is shown below:

Required:
(a) Calculate the value of a common share of Sulu Ltd. using each of the following valuation methods:
(i) Net assets (liquidation) basis
(ii) Dividend yield
(iii) Price/earnings ratio.
(b) Critically evaluate each of the valuation methods identified in part (a) above.

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Sulu Ltd. Statement of Retained Earnings for the year ended May 31, 2010 Opening retaired earnings, June 1, 2009 Add: Net income for 2010 Lass: Dividends paid Closing retained earnings, May 31, 2010 83,500 48,500 (18,000 114,000 Sulu Ltd. Balance Sheet as at May 31, 2010 Current assets Cash Accounts receivable Inventory Total current assets Property, plant, and equipment Land Plant and machinery Less: Accumulated depreciation Vehicles Less: Accumulated depreciation Total property, plant, and equipment Total assets Current liabilities Accounts payable Long-term liabilities Bond, 10% Total liabilities 24,000 49,000 84,000 157,000 180,000 120,000 30,000 35,000 90,000 16,00019000 289.000 446,000 42,000 140,000 182,000 Shareholders' equity Common shares Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 150,000 114,000 264,000 446,000