Question
Imech ltd provides a training service to students studying car manufacturing apprentinceships in birmingham. The company employs a team of highly skilled and experienced teaching
Imech ltd provides a training service to students studying car manufacturing apprentinceships in birmingham. The company employs a team of highly skilled and experienced teaching staff and has built up an excellent reputation. the shareholders of IMECH are the original founders, who are now keen to retire and sell the business as a going concern. they need to arrive at an estimate of what the business is worth. Then following information about imech is available.
**Net asset value (using book values) (m) - 5
**Number of shares issued(million) - 2
**Earnings per share (pence) - 145
A recent valuation of the main training building owned by IMECH was 400,000 above book value. Inventory includes text books that the compan produces. A number of textbooks are out-of-date editions, which have a realisable value of 50,000 below book value. All other assets are realisable at a book value. The average price earnings ration for listed companies in the same sector as IMECH is 10.
REQUIRED:
1. Preapare valuations of IMECH using
a)Net asset value
b)P/E ratio method
2. Discuss the suitability of the valuation methods used in (1) for valuing IMECH.
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