Required as the corporate treasury head the chairman

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the differing valuations provided by the analysts fraternity. Required: As the Corporate Treasury Head, the Chairman has approached you for some advice on the reasons for the different prospective valuations for MOBILE ONE. Your answer should include an explanation of the various methods used for valuing firms. Definition + formula + limitation + scenario if 5 marks each Lecture 4 notes 2. Robbie corp which is unlisted has a pre-tax profit of RM 80 million. It has issued 100 million shares. Corporation tax rate is 28%. The related industries current PE ratio is the multiple of 15 times. Value Robbie corp shares. Market price = P0 P0 = EPS X P/E ratio = (RM 80 million (1-0.28) / 100 million shares) X 15 times P/E ratio = RM 8.64 3. How do you define free cash flow? What is the free cash flow of the following firm? Operating Profit(after depreciation of RM 2 million) RM 25 million Interest Paid RM 1 million Tax Rate 28% Investment Expenditure RM 3 million Free cash flow is the cash of the company produce through its operations, less the cost of expenditures on assets FCF= EBIT (1+ Tax) + Depreciation - Charges (interest payment) – working capital – capital expenditure
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= 25 million (1+0.28) + 2 million – 1 million – 1 million = RM 16 million 4. Latitude Tree holdings bhd earns 16 cents per share. It has a policy of retaining 75% of
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  • Fall '14
  • Generally Accepted Accounting Principles, Head of Corporate Treasury

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