ABS Ltd is planning to obtain a stock market listing by offering 30% of its...
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ABS Ltd is planning to obtain a stock market listing by offering 30% of its existing shares to the public. No new shares will be issued. Its most recent summarized results are as follows; Turnover GHC 120 m Earnings GHC 1,500m Number of shares in issue 6 million The company is highly geared and has a dividend policy of 50% pay-out rate. And the retention policy is expected to achieve 10% dividend growth each year. Summarized details of two listed companies in the same industry as ABS Ltd are as follows; UCC Ltd UPSA Ltd Gearing (Total debt/ Equity) 45% 10% Equity Beta 1.60 1.10 The current Treasury bill yield is 22% per annum. The average market return is estimated to be 27%. The shares will be offered to the public at a price 20% lower than the estimated market valuation in order to increase the prospects of success for the public issue. What will be the issue price?
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