(a) Net asset method

total asset-total liabilities

45m

Earning based method

p/e=market price/eps
1237/112.5=10.995=11times
1.5m*1.53*1.05=2.41m
2.41m*11=26.5m

Dividend valuation model

(1(1+0.05))/(0.1-0.05)=RM21
Rm21*1.5m=31.5m

(b)
I) forecasted erarning maybe overstated.
It is because current earning is 2.295m (1.5m*1.53) but
expected earning is 4m. It is hard to meet the expected earning.

ii) total market value of the company's share is below the net
asset value.
The net asset value must be the lowest. In this case the net
asset value is higher than dividend and PE.
iii) high gearing ratio
(a) Net asset method
total asset-total liabilities
=124-25-6
93

Earning based method

p/e=market price/eps
11=x/50m
x=550m

Dividend valuation model

cost of equity =3%+0.86(10%-3%)
=9%

(0.8/9%)*50m
=444m

Discounted cash flow method

year cash flow df 9% PV

1 50*1.03=51.5 0.917 47.2255
2 51.5*1.03=53.045 0.842 44.66389
3 (53.045*1.02)/(9%-2%)=772.941 0.842 650.8163
742.7057

(b) Net asset value:

The asset based value indicates the minimum floor price for the disposal of
Fern. This value is relevant for a company that is no longer a going concern as
the value reflects the break up value of assets in a disposal. Howerver, this
value does not include intangible assets and even the value of tangible assets is
not fairly reflected due to the application accounting conventions and standards
when preparing the financial statements.