Oustanding stocks 92,000,000

Per share $52.20

Income statement ($M) 2019 2020

Revenue 372 422

Depreciation 12 15

Other operating Expense 271 298

Income before taxes 89 109

Taxes 23 28

Net Income 66 81

Dividends 20 19

Earnings per share 0.72 0.88

Dividednds per share 0.22 0.21

common shares outstanding 92 92

Balance Sheet ($m) 2019 2020

Current Assets 334 412

Net Property, plant and equipment 398 577

Total Assets 732 989

Current Liabilities 43 121

Long term debt 0 0

Total Liabilites 43 121

Shareholder Equity 689 868

Total Liabilities and Equity 732 989

Capital Expenditure 42 53

*first number is 2019, second is 2020.

Beta 1.05

Debt ratio 40% cost of debt 6.50%

Dividend next 2 years 20% Dividend year 3 onwards 6%

FCFE first 2 years 20% FCFE year 3 onwards 8%

Market risk premium 6%

Risk free rate 4.50%

Industry Beta 1.3 Industry

P/E 18% Industry

P/S 5% Industry

P/BV 4.5%

(a) Find the Free Cash Flow to Equity? (Most important)

(b) Recommend whether the fund should proceed with the proposed acquisition of Oceanic Limited using an appropriate benchmarking tool to demonstrate your understanding of the acquisition.

(c) Calculate the approximate acquisition budget needed to buy up all outstanding shares of Oceanic Limited if the decision is made to proceed.