Please answer the following 4 questions:

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1. Estimate the value per share of AAA using the dividend discount approach we

discussed in class as of March 31, 2009. Assume all cash flows in subsequent years

occur at year-end (e.g., discount 2010 cash flows back one year).

2. Estimate the value per share of AAA using the discounted cash flow approach we

discussed in class.

3. Estimate the value per share using the balance sheet method we discussed in

class.

4. Compnay has been trading at about $0.42 per share. Based on the preceding should you

buy or sell shares?

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Assume that your analysis of COMPANY indicates the following forecasts and assessments (in

alphabetical order):

Accounts receivable: increase of 156 in 2010; decrease of 251 in 2011,

Cost of capital is 10%

Depreciation and amortization: constant at 2009 levels for 2010 and 2011

Future free cash flows (already adjusted for interest) from 2012 to perpetuity, present

valued to 2009: 3,400

Future repurchases and dividends from 2012 to perpetuity, present valued to 2009: 3,590

Income tax rate: 25% for all future periods

Interest-hearing debt: 621 as of March 31, 2009, constant going forward

Interest expense: constant at 2009 levels for 2010 and 2011

Internally developed patents, fair value: 3,100M as of March 31, 2009

Inventories: decrease of 123 in 2010; increase of 44 in 2011

Net Income: 233 in 2010; 315 in 2011

Payables: increase of 442 in 2010; decrease of 51 in 2011

Payments for construction of plant and equipment in progress: 23 in 2010 and 45 in 2011

Purchased intangibles, fair value: 1,600M as of March 31, 2009

Payments to purchase completed property, plant and equipment: 110 in 2011; 112 in 2011

Retained earnings: increase of 43 in 2010; increase of 115 in 2011

Sales of PP&E: none in 2010; proceeds of 15, gain of 5 in 2011

Shares outstanding: 9,211 million as of March 31, 2009

Transfers of self-constructed property, plant and equipment from construction in progress

to completed PP&E: 17 in 2010; 19 in 2011

Share repurchases: 65 in 2010; 76 in 2011

Unrecognized environment liabilities, fair value: 150M as of March 31, 2009

BALANCE SHEETS

At March 31, 2009

		2009
Non-current assets
Property, plant and equipment	314	365
Construction in progress	47	51
Intangible assets	1853	1838
Available-for-sale securities	102	68
Other	205	172
	2521	2494
Current Assets
Inventories	450	472
Trade receivables, net	728	861
Other	746	1182
Cash and cash equivalents	1863	2191
	3787	4706
Total Assets	6308	7200
Share capital	1136	1180
Reserves	175	433
Total equity	1311	1613
Non-current liabilities	891	1098
Current liabilities
Trade payables	1991	2282
Provisions and accruals	1510	1945
Income Tax payable	89	87
Bank loans	20	61
Current portion of long-term debt	437	49
Other	59	65
	4106	4489
Total Liabilities	4997	5587
Total liabilities and equity	6308	7200

INCOME STATEMENT
For the year ended March 31, 2009
	2009
Sales	14901
Cost of sales	13160
Gross profit	1741
Selling, distribution and other expenses	-1103
Administrative expenses	-628
Research and development expense	-220
Operating loss	-210
Interest income	62
Interest expense	-40
Loss before taxes	-188
Taxation	-38
Loss for year	-226

CASH FLOW STATEMENT
For the year ended March 31, 2009
	2009
Cash flows from operating activities
Net income	-226
Depreciation and amortization	281
Gain/loss on sale of equipment and other assets	-1
Change in receivables	616
Change in inventories	26
Change in payables	-692
Other	-59
Net cash generated from operating activities	-55
Purchase of property, plant and equipment	-107
Proceeds from sales of property, plant and equipment	11
Construction of property, plant and equipment in process	-64
Purchases of intangible assets	-17
Proceeds from sales of securities available for sale	10
Net cash used in investing activities	-173
Exercise of share options	10
Repurchase of shares	-54
Dividends paid	-178
Increase in bank borrowings	122
Net cash used in financing activities	-100
Change in Cash	-328