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What is the value of one ordinary share of sjh company

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Reference no: EM132826538

Question - KJK is evaluating SJH Company. In 2019, when KJK is performing his analysis, the company is unprofitable. Furthermore, SJH Company pays no dividends on its common shares. KJK decides to value SJH Company by using his forecasts of FCFE. KJK gathers the following facts and assumptions:

The company has 17.0 billion shares outstanding.

Sales will be $5.5 billion in 2020, increasing at 28 percent annually for the next four years (through 2024).

Net income will be 32 percent of sales.

Investment in CAPEX will be 35 percent of sales; investment in working capital will be 6 percent of sales; depreciation will be 9 percent of sales.

100 percent of the net investment in assets will be financed with equity.

Interest expenses will be only 2 percent of sales.

The tax rate will be 10 percent. SJH Company's beta is 2.1; the risk- free government bond rate is 6.4 percent; the equity risk premium is 5.0 percent.

At the end of 2024, KJK projects SJH Company terminal stock value is 18.0x the earnings in 2024.

Required - What is the value of one ordinary share of SJH Manufacturing Company?

Reference no: EM132826538

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