PR Industries plc, a major listed conglomerate, is considering acquiring an interest in Howard Pope Ltd, an unlisted business that has been trading for about 40 years as a manufacturer of domestic appliances.

The latest available summarised statement of financial position of Howard Pope Ltd is as follows:

Last year Howard Pope Ltd made a profit for the year of £15.3 million and paid a dividend of £5.0 million. In recent years the directors have adopted a policy of increasing dividends by approximately 10 per cent each year.
The cost of equity of listed businesses that are in the same industry as Howard Pope Ltd and have similar levels of capital gearing is estimated at 13 per cent. The average price/earnings ratio of such businesses is 15.0 .

The directors of PR Industries plc have not yet decided what proportion of the share capital of Howard Pope Ltd they wish their business to acquire.

Estimate the value of a share in Howard Pope Ltd on three different bases. Comment on your valuations and the bases used. Would your view be different according to whether PR Industries plc was acquiring a controlling or a minority interest?

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Statement of financial position as at 31 December last year Non-current assets Current assets Total assets Equity Issued share capital (ordinary shares of 5p) Share premium account Revenue reserve Floating rate term loan Current liabilities Total equity and liabilities m 50.67 121.55 172.22 2.00 6.00 105.42 113.42 30.00 28.80 172.22