SLMA Corp. for the last ten years, has earned and had cash flows of about P600,000 every year. As per the predictions of the company's earnings, the same cash flow would continue for the foreseeable future. The expenses for the business every year is about P500,000 only. Based on the available public information a P4 million Treasury bond has a prevailing return of P40,000 quarterly.

SLMA Corp. for the last ten years, has earned and had cash flows of about P600,000 every year. As per the predictions of the company's earnings, the same cash flow would continue for the foreseeable future. The expenses for the business every year is about P500,000 only. Based on the available public information a P4 million Treasury bond has a prevailing return of P40,000 quarterly.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 29P

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SLMA Corp. for the last ten years, has earned and had cash flows of about P600,000 every year. As per the predictions of the company'searnings, the same cash flow would continue for the foreseeable future. The expenses for the business every year is about P500,000only. Based on the available public information a P4 million Treasury bond has a prevailing return of P40,000 quarterly. Using Capitalization of Earnings approach, assuming SLMA would sell 20% of its shareholdings, what will be the minimum selling price? ANSWER: 2,500,000 provide the solution please
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