17. Aasim International is doing business for last 20 years and company is registered in Muscat Securities Exchange. Below is the summarized Balance Sheet for the company for the year 2020:

Aasims 31, December 2020
		OMR (000)
Fixed assets		450
Current assets
Stocks	240
Debtors	180
		420
Liabilities
Creditors (short term)		(600)
Creditors (long term)		(75)
Shareholders funds (Net assets)		195

Analysts have calculated the beta for Aasim of 1.3 and this may be used as the appropriate adjustment to the risk premium on the average share. The riskfree rate of return on Treasury bills is 7.5 per cent and the latest study shows an annual equity risk premium over the yield on treasury bonds of 4.95 per cent for the past several years.

The impressive average annual growth in earnings and dividends over the last few years is likely to continue for foreseeable future.

Year	Earnings per share (Baisa)	Dividends per share (Baisa)
2020	30	15
2019	27	13.5
2018	25.5	12.75
2017	24	12
2016	19.5	9.75
2015	18	9
2014	15	7.5
2013	15	7.5

Company policy is to distribute 50% of its income to its shareholders as dividend

Related Information:

Independent valuation report for company suggests that company fixed assets value is OMR 525,000

You believe that company has overstated the value of stocks by OMR 45,000 and onequarter of its debtors are likely to be uncollectable.

There have been no new issues of shares in the past eight years. Total number of outstanding 1,000,000 shares in issue.

Required:

a). Value one of company shares value using the dividend valuation model. (Assume the dividend of 50% of its 2020 income has been just paid and the next dividend is due in one year.) (2 Marks)

b). What is the prospective price to earnings ratio (P/E ratio) given the share price in a)?(1.5 Marks)

c). Value company using the net asset value (NAV) method.(1.5 Marks)