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Essay / Research Paper Abstract
This 3 page paper looks at a case study provided by the student. Rondo has the opportunity to acquire Poly Inc. The paper considers if this should go ahead and considers the way the shares should be valued. The bibliography cites 1 source.
Page Count:
3 pages (~225 words per page)
File: TS14_TErondo8.rtf
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Unformatted sample text from the term paper:
ahead it is likely that the amount needed will mean that the target ratios will not be met with the fall in the level of dividend paid per share as
well as the increase in debt that would take the debt to asset ratio above the comfort zone. However, looking at the potential purchase there is a great potential opportunity
and the purchase may be worth considering even if the target ratios are not met. If Poly Inc is being considered as an acquisition then the current share price
is a guide to the potential cost of acquisition, but to asses a fair price there are a number of models that can be used. We will use the dividend
discount model, we can argue this is more likely to be accurate than the capital asset pricing model as we do not have the requited beta to be used for
the calculation. There are other methods such as the book value and the dividend discount model. The value of the physical assets of
company is used to give the book value of a firm. The book value may be defined as the net assets of a company, that is the assets less the
liabilities. In this paper we will uses the formula of book value being total assets, less total liabilities plus any preferences stocks that are outstanding. This is a figure
that is used in ratio analysis in terms of the book value per share. This is seen where the book value is divided by the number of share outstanding.
This will give a book value per share and show how much of a share value is supported by underlying assets. The price of the share may be below
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