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Valuation of Z & K Company

by Expert Jayjay1 | 09 Mar 2017

There are several methods used to calculate the value of a company. For instance, we can use the corporate valuation model or the dividend growth model. The dividend growth model involves the discounting of dividends and their growth. To be able to apply the method, current divided, growth of the dividend and the rate of return of the dividend are required.

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Value = Current dividend (multiply) (1+Dividend growth)
(Rate of return – Dividend growth)
In the case of the corporate valuation model method, the total value of the company is defined as the value of non-operating assets plus the value of operations plus the value of growth options (Koller, Goedhart. and Wessels, 2005).
Using Z&K Company as an example, the two methods of valuing a company can be demonstrated as follows:
Dividend growth model.
Current dividend=$ 30, dividend growth= 0.1, rate of dividend growth= 0.8%
Value of Z&K = 30* (1+0.5)/ (0.8- 0.5)
=$150.00 million

Corporate valuation model
Non-operating assets =$85.00 million, value of operations= $35.00 million, $30.00 million.
Value of Z&K=$150.00 million
The total shares capital= $15000000 thousand, the number of shares=$1500000 thousand
Price per share= $10, the actual price of this company is $ 9.85. There is a difference between the calculated and the actual price of the share due to rounding off of the figures.
In the case corporate governance of Z$K, there is a regular meeting of the Audit Committee to make a review of the accounting practices and principles that are adopted; discuss matters concerning internal control and also financial reporting matters (Koller, Goedhart. and Wessels, 2005) The Chief Financial Officer, External Auditors and the Finance management Department attend to questions on their reports of their reports.

Reference

Koller, T., Goedhart, M. and Wessels, D. (2005). Valuation: Measuring and the Managing The Value of Companies (4 Ed.) New Jersey: John Wiley& Sons

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