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(a) Dividend Growth Rate Calculation. Set out below is the dividend per ordinary share paid by Airtours plc, a major holiday tour operator quoted on the London Stock Exchange, for the years 1992 to 1996. Calculate, to the nearest whole per cent, the average growth rate in dividend per share over the period. Does the share reflect the constant dividend (Gordon) growth rate model? Taxation is to be ignored.

Year DPS pence 1996 16.00 1995 14.00 1994 12.00 1993 8.81 1992 7.09

(b) Equity Share Valuation—Various Methods. The following information has been taken from the annual report and accounts of Airtours plc for the financial year end 1996.
Profit and Loss Account £000 Profit before interest and tax (PBIT) 76,805 Net interest receivable 10,021 Tax 21,701 Minority interests 223 Preference dividend 3.201 Tangible fixed assets 256,428 Investments 16,232 Cash and deposits 425,588 Stocks 6,821 Debtors 235,898 Creditors and other liabilities 733,465 Number of Ordinary shares 125,322,221 P/E ratio (historic—1996) 12.2 P/E ratios (forecast):
1997 19.9 1998 17.4 EPS (forecast):
1997 51.0p 1998 58.2p Required:
Calculate the value of an ordinary share in Airtours plc according to the following methods:
(i) Net assets;
(ii) Price/earnings ratio. Use the historic P/E ratio for 1996 and compare this with valuations using the forecast P/E ratios for 1997 and 1998.

(c) Check the current P/E ratio and share price in the Financial Times. You will find Airtours listed in the Leisure and Hotels sector. How do they compare with the figures you calculated in

(b) above?
Taxation is to be ignored.