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Use the following information to answer questions 11 and 14. As an equity a...
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Use the following information to answer questions 11 and 14.
As an equity analyst, you analyse the financial statements of WNC Ltd, an automobile manufacturer. Your analysis results in the following assumptions and conclusions:
· WNC Ltd’s earnings and Free Cash Flow to Equity (FCFE) growth will be 15 % per annum for two years and will then stabilise at 8 % per annum.
·
·
· Government bonds currently yield 6.4%, and the market equity risk premium is 5.4%.
· The most recent dividend paid to WNC Ltd shareholders was R2.20 per share.
· WNC Ltd has 10,800 shares outstanding.
The statement of cash flows of WNC Ltd on 31 December 2024 is as follows:
Cash Flow From Operating Activities
Net income
Depreciation
Changes in Working Capital
(Increase) Decrease in receivables (Increase) Decrease in inventories Increase (Decrease) in payables
Increase (Decrease) in other current liabilities Net change in working capital
Net cash flow from operating activities
Cash Flow From Investing Activities Purchase of fixed assets (PPE) Net cash from investing activities
Cash Flow From Financing Activities Change in debt outstanding Payment of cash dividends
Net cash from financing activities
Net change in cash and cash equivalents
End-of-period cash
|
R
(4,000) (6,400) 4,800 1,200
(12,000)
3,200 (23,760)
|
R
29,960 8,400
(4,400)
33,960
(12,000)
(20,560)
1,400 8,760 10,160
|
Calculate the value of a WNC share on 31 December 2024, using the dividend discount model.