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Universiti Utara Malaysia Shazz Corporation Case Study

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User Generated

Subject

Business

School

Universiti Utara Malaysia

Type

Case Study

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1.Assuming the company continues its current growth rate, what is the value per
share of the company’s stock?
Shazz Corporation is equally owned by Shahrin and Zarina. The total is 100 000 share
dividend to Shahrin and Zarina of RM54,000 each. The total is RM108 000
ROE = 0.25
K = 0.2
EPS = RM4.32
Retention Ratio(b)
=
1 -
D
NI
=
1 -
108 000
432 000
=
1 - 0.25
=
0.75
Growth Rate(g)
=
ROE * b
=
0.25 * 0.75
=
0.1875
=
18.75%
Total Equity Value
=
D1
k - g
=
( 108 000 * 1.1875)
0.2 - 0.1875
=
128 250
0.0125
=
RM 10 260 000

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Value per share
=
RM 10 260 000
100 000 Share
=
RM 102.60 Per Share

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1.Assuming the company continues its current growth rate, what is the value per share of the company’s stock? Shazz Corporation is equally owned by Shahrin and Zarina. The total is 100 000 share dividend to Shahrin and Zarina of RM54,000 each. The total is RM108 000 ROE = 0.25 K = 0.2 EPS = RM4.32 Retention Ratio(b) = 1- D NI = 1- 108 000 432 000 Growth Rate(g) Total Equity Value = 1 - 0.25 = 0.75 = ROE * b = 0.25 * 0.75 = 0.1875 = 18.75% = D1 k-g = ( 108 000 * 1.1875) 0.2 - 0.1875 = 128 250 0.0125 = RM 10 260 000 Value per share = RM 10 260 000 100 000 Share = RM 102.60 Per Share 2. To verify their calculations, Shahrin and Zarina have hired Amir as a consultant. Amir was previously an equity analyst. Amir has examined the company’s financial statements as well as those of its competitors. Although Shazz currently has a technological advantage, Amir’s research indicates that Shazz’s competitors are investigating other methods to improve efficiency. Given this, Amir believes that Shazz’s technological advantage will last for only the next five year. After that period, the company’s growth will likely slow to the industry average. Additionally, Amir believes that the required return the company uses is too high. He believes the industry average required return is more appropriate. Under Amir’s assumptions, what is the estimated stock price? Setara Corporation’s negative earnings per share were the result of an accounting writ ...
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