The managing directors of Hazard PLC are considering what value to place on Bale PLC, a company they are planning to take over in the near future. Hazard PLC's share price is currently 3.68, and the company's earnings per share stand at 21p. Hazard's weighted average cost of capital is 8%.

The board estimates that annual after-tax synergy benefits resulting from the takeover will be 2m, that Bale's distributable earnings will grow at an annual rate of 3% and that duplication will allow the sale of 4.5m of assets, net of corporate tax (currently standing at 25%), in a year's time. Information relating to Bale PLC:

Financial Position Statement of Bale PLC.

m Non-Current Assets108 Current Assets4

112 Equity: Ordinary Shares (1)60 Reserves3

63 5% Bonds32 Current Liabilities17 Total Liabilities112

Statement of Profit or Loss Extracts

m Profit before interest and tax14.2 Interest payments2.2 Profit before tax12.0 Taxation3.0 Distributable Earnings9.0

Other Information:

Current ex-dividend share price1.94 Latest dividend payment21.3p Past four years' dividend payment19.2p, 19.9p, 20.2p, 20.8p Bale's Equity Beta1.46 Treasury bill yield2% Return of the market7%

Required:

(a) Given the information above, calculate the value of Bale PLC using the following valuation methods:

i. Price / Earnings Ratio. (using Hazard's P/E ratio)(5 marks) ii. Dividend valuation method.(5 marks) iii. Discounted cash flow method.(5 marks)