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Use the following information to answer questions 11 and 14. As an equity anal...
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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 Limited, an automobile manufacturer. Your analysis results in the following assumptions and conclusions:
· WNC’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.
· WNC will maintain its current dividend payout ratio.
· WNC has a beta of 1.1.
· Government bonds currently yield 6.4%, and the market equity risk premium is 5.4%.
· The most recent dividend paid to WNC shareholders was R2.20 per share.
· WNC Ltd has 10,800 shares outstanding.The statement of cash flows of WNC 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 inventoriesIncrease (Decrease) in payables Increase (Decrease) in other current liabilitiesNet change in working capital Net cash flow from operating activities
Cash Flow From Investing ActivitiesPurchase of fixed assets (PPE)Net cash from investing activities
Cash Flow From Financing ActivitiesChange in debt outstandingPayment of cash dividends Net cash from financing activities Net change in cash and cash equivalentsBeginning-of-period cash 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 two-stage FCFE model.