ADVANCED FINANCIAL MANAGEMENT (10%) TASK 1 Short Corporation manufactures electrical equipment in Johor Bahru, Shazz has experienced ropld growth because of energy efficiency of its systems. Shazz Corporation is equally owned by Shahrin and Zarina. The original agreement between them gave each 50.000 shares of stock. In the event either wished to sell the stock, the shares had to be offered to the other at cdiscount price Although nether of them wants to sell any shores of this time, they have decided they should value their holdings in the company for financial planning purposes . To accomplish this, they have gathered the following information about their main competiton. Shazz Competitors Jaya Cooling Mutiara Healing Setora Industry Corporation Corporation Corporation average EPS B0 RM 32 - HVK2,47) EM, DPS 20. B3.52 EM.S4 1.41 Stock Price RM15.19 RM12.49 RM48.60 RM25.43 145 145 138 ROE Required rate of return 10% 13% 125 11.675 Sotora Corporation's negative earnings per share were the result of an accounting write-off last year. Without the write-off. EPS for the company would have been RM2.34. Last year, Shazz had an EPS of RM4.32 and paid a dividend to Shahrin ond Zarina of RM54.000 each. The company ako hod a return on equity of 25 percent. They beleve a required retum for the company of 20 percent is appropriate QUESTIONS: Assuming the company continues its current growth rate. what is the value per shore of the company's stock To verify their calculations, Shahrin and Zarina have hired Amir as a consultant. Amir was previously an equity analyst Amir has examined the company's financial statements as well as those of competitors. Although Shazz currently has a technological advantage. Amir's research indicates that Shazz's competitors ore thwessgoting other methods to improve efficiency. Given this. Amir beieves that Shazze's technological advantage will last for only the next five year. After that period, the compony's growth wil Rely slow to the industry average. Additionally, Amir believes that the required return the company uses is too high. He believes the industry average required return is more appropriate. Under Amir's assumptions, what is the estimated stock price? 3. What is the industry average price camins ratioe What is Show price earnings ratio Comment on any differences and explain why they may exist Assume the company's growth rate declines to the industry average after five years. What percentage of the stock's values attributable to growth opportunities? 5 Assume the company's growth rate slows to the housty average in five years, who future refum on equily does this imply