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Question 2a ii

GWW Co is a listed company which is seen as a potential target for acquisition by financial analysts. The value of the company has therefore been a matter of public debate in recent weeks and the following financial information is available:
Year 2012 2011 2010 2009
Profit after tax ($m) 10·1 9·7 8·9 8·5
Statement of financial position information for 2012
$m $m
Non-current assets 91·0
Current assets
Inventory 3·8
Trade receivables 4·5
8·3
Total assets 99·3
Equity finance
Ordinary shares 20·0
Reserves 47·2
67·2
Non-current liabilities
8% bonds 25·0
Current liabilities 7·1
Total liabilities
99·3

The shares of GWW Co have a nominal (par) value of 50c per share and a market value of $4·00 per share. The business sector of GWW Co has an average price/earnings ratio of 17 times.

The expected net realisable values of the non-current assets and the inventory are $86·0m and $4·2m, respectively.

In the event of liquidation, only 80% of the trade receivables are expected to be collectible.

Required:
(a) Calculate the value of GWW Co using the following methods:

(ii) net asset value (liquidation basis); and

Note: The total marks will be split equally between each part. (6 marks)