BUS3044F+Tutorial+3 - BUS3044F 2011 Tutorial 3 Due Week...

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BUS3044F 2011 Tutorial 3 Due: Week beginning 7 March _____________________________________________________________ _ Question 1 You have the following information for Tyler and Graham (T & G): Number of shares in issue: 4,000,000 Number of bonds in issue: 2,500 Current share price: R 2.85 Par value of bonds: R 1,000 Cash and investments: R 1,425,000 Net profit: R 740,000 Interest paid: R 650,000 Notes: i. Depreciation is done at 20% per year on the book value of depreciable assets at the beginning of the year. At the beginning of this year total depreciable assets at cost was R 2,300,000 and accumulated depreciation was R 1,450,000. ii. Bonds are currently trading in the market at an 8% discount to par value. iii. The effective tax rate is 24% iv. There was no amortization for the year a) Determine T & G’s EV/EBITDA ratio. (10 marks) b) If you believe that an EV/EBITDA of 9.0 is justified for T & G, determine what you consider to be the fair value of one T & G share. (3 marks) Question 2 You have just been appointed Financial Director of Struggling Enterprises, whose main
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