SHARE VALUATION

QUESTION 8

Tobias Limited has issued an unlimited number of non-redeemable preference shares

with a par value of R100 each at a 4 percent (4%) discount. The preference dividend is

15 percent (15%) per year.

Management expects that the earnings per ordinary share will show no growth over the

next two years where-after it will grow at 6 percent (6%) infinitely. The most recent

dividend per share is R2,00.

The required rate of return of Tobias Limited is 20 percent (20%).

Required:

Calculate the value of the ordinary shares and preference shares of Tobias Limited.

(Show all necessary calculations).