EQUITY VALUATION

Give what is asked in the problem. Write your solutions on the space provided.

1. At the end of 2020, the balance sheet of Sherlock Company showed total assets of P4 million
pesos, total liabilities of P2.5 million, preference shares of P250,000, and 120,000 outstanding
shares. How much is the book value per share of the company?

BV of assets−BV of liabilities−BV of preference shares

BV per share =
Total no . of outstanding shares
P 4,000,000−P 2,500,000−P 250,000
BV per share =
120,000 shares
P 1,250,000
=
120,000 shares
= P 10.42 per share

2. Upon further evaluation, Sherlock Company found out that the assets can only be realized at
P3.4 million. How much is the liquidation value per share of the company?

LV of assets−LV of liabilities− LV of preference shares

LV per share =
Total no . of outstanding shares
P 3,400,000−P2,500,000−P250,000
LV per share =
120,000 shares
P 650,000
=
120,000 shares
= P 5.42 per share

3. Investor Christopher wants to buy shares of Clider Rex Company. Clider Rex Company’s
shares are currently selling at P20 per share on the Philippine Stock Exchange (PSE). Research
shows that dividends are stable at P5 per year and it is expected to be resold at P35 per share
after a year. Christopher expects a 7% return on his investment and plans to hold the shares of
Clider Rex Company for a year. What is the value of the shares after a year?

Where D 1 = P 5
ke = 7 %
P1 = P 35

P D1 P1
o= +
(1 +k e ) (1+k e )
P P5 P 35
o= +
(1 +7 %) (1+7 % )

Po= P 4.67+ P 32.71

Po=37.38