Test Your Understanding (1) Extracts from the financial statements of Bluebell Co., a liatad anmnanir ara na follorira. A similar size competitor company has a price/earnings ratio of - 12.5 times. The competitor believes that if Bluebell Co were liquidated, property, plant, and equipment would only realise RM600 million, while 10\% trade receivables would be irrecoverable and inventory would be sold at RM30 million less than its book value. Separately, Bluebell Co is considering the acquisition of Dandelion Co, an unlisted company which is a supplier of Bluebell Co. 1. What is the value of Bluebell Co on a net realisable value basis? 2. What is the value of Bluebell Co using the earnings yield method? 3. Which of the following statements is correct? A. Dandelion Co is easier to value than Bluebell Co because a small number of shareholders own all the shares. B. Bluebell Co will have to pay a higher price per share to take control of Dandelion Co than if it were a minority holding. C. Script dividends decrease the liquidity of shares by retaining cash in a company. D. Dandelion Co's shares will trade at a premium to similar listed shares because it will have a lower cost of equity. 44 24/27