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Changes in Expected Return

Changes in Expected Return Any management action that would increase the level of expected return without changing risk (required return) would have a positive effect on share values/owners wealth and should, accordingly, be undertaken.

Price/Earnings (P/E) Multiples/Ratio

Price/Earnings (P/E) Multiples/Ratio The P/E ratio/multiple reflects the amount investors are willing to pay for each rupee of earnings. Symbolically, where 1 - b = dividend pay ratio r = required rate of return ROE x b = expected growth rate The earnings per share...

Liquidation Value

Liquidation Value This approach to valuation of shares is based on the liquidation value per share (LVPS). If the total assets of Alert Ltd can be liquidated for Rs 52.5 crore, its LVPS = (Rs 52.5 crore - R.. 45 crore) + 10,00,000 = Rs 75. The minimum value of the...

Book Value Approach

Book Value Approach This approach uses the book value per share (BVPS) as the basis of valuation of shares. The BVPS is the equity capital plus reserves mill surplus) divided by the number of outstanding equity shares. Alternatively, the BVPS is the amount per share...

OTHER APPROACHES TO VALUATION OF SHARES

OTHER APPROACHES TO VALUATION OF SHARES In addition to the dividend valuation approach discussed in the preceding section, there are other approaches to valuation of shares. WC discuss in this Section three of these: (i) hook value, (ii) liquidation value and (iii)...