The CEO of R B Patel has made a proposal to its board to make a take-over offer of PBL Ltd. He is proposing to pay $3.15 per share. The current market share of PBL Ltd is $3.03. The CEO of R B Patel Ltd justifies the price offer, indicating that R B Patel is the largest customer of PBL Ltd, buying and retailing all the drinking water. It will be a natural addition to their business. The CEO of R B Patel indicates that the water business will grow at 2% per year and hence dividends will also grow at this rate. PBL Ltd has a beta of 1.2 and 15-year government bonds yield 1.5%. The average market returns on the stock exchange where PBL Ltd trades is 3.5%. Refer to the PBL Ltd 2020 Financials provided.

Required

The board of R B Patel is not convinced with the offer price and seeks your advice. Prepare a report for the R B Patel board whether the offer price is justified. Your report should include three different approaches. Show all your calculations.