Paras TMT Ltd. is a TMT manufacturing company with a face value of 10 per share. The following information is given about the company: The company…

CA Intermediate · Financial Management and Strategic Management · MTP · January 2025
Paras TMT Ltd. is a TMT manufacturing company with a face value of 10 per share. The following information is given about the company: The company is expected to grow @ 10% p.a. for next four years then 5% for an indefinite period.Rate of return expected by the shareholders on their share investments is 15%.Company paid 4as dividend per share for the current Financial Year. FIND out the intrinsic value per share

Suggested Answer and Working Notes:

G = Growth rate Calculation PV of Dividends Year Dividend per share PVF @ 15% PV 1 4.4 0.870 3.828 2 4.84 0.756 3.660 3 5.324 0.658 3.503 4 5.856 0.572 3.350 Total 14.341 PV of Terminal Value = (5.856 x 1.05) / (0.15 - 0.05) x (1 / (1 + 0.15) 4 ) = 61.488 x 0.572 = 35.171 Intrinsic value of share = PV of Dividends + PV of terminal value = 14.341 + 35.171 = 49.512

Topics: Part-A: Financial Management

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