QUESTION 2 Saints plc is looking to place a value on a target company called Rifles plc using two valuation methods:
(1) an asset-based liquidation value: the Net Asset Value from the accounts is £30.0m. The disposal value of the non-
current assets is believed to be £1.2m lower than the book value and the disposal value of inventory is estimated to be
£1.5m lower than book value.
(2) an earnings yield valuation. The current earnings of Rifles plc are £7.9m. In the future they are expected to grow at
4.0% per annum. Companies of similar size and industry have an average P/E ratio of 7.6.
What are the appropriate valuations of Rifles plc?
O A Liquidation valuation: £27 3m Earnings yield valuation: £86.3m
B. Liquidation valuation: £30.0m Earnings yield valuation: £89.7m
oc Liquidation valuation: £27.3m Earnings yield valuation: £89.7m
OD. Liquidation valuation: £30.3m Earnings yield valuation: £86.3m
E. Liquidation valuation: £30.0m Earnings yield valuation £82.3m