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A. The finance literature has suggested that prospective analysis is central to security valuation in...

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A. The finance literature has suggested that prospective analysis is central to security valuation in examining the viability of companies' strategic plans and the process in forecasting the financial statements which includes the Statement of Financial Position. Discuss whether you agree or do not agree with the literature. (5 marks) B. The following are the financial statement information for Budi Setia Bhd as of 2018 and 2019. Sales growth Net profit margin Net working capital turnover Fixed asset turnover Total operating assets/Total equity Number of shares outstanding 2018 8.5% 6.71% 8.98% 1.67 1.96 1,737 2019 10.65% 8.22% 9.33% 1.64 2.01 1,737 Sales Net income Net working capital Fixed assets Total operating assets Long term liabilities Total shareholders' equity RM000 25,423 1,706 2,832 15,232 18,064 8,832 9,232 RM000 28,131 2,312 3,015 17,136 20,151 10,132 10,019 Required: You are to prepare a valuation of the ordinary shares of Budi Setia Berhad as of 2019 using the Residual Income Valuation Model, under the following assumptions: a. Forecast horizon of five years b. Sales growth of 10.65% per year over the forecast horizon and 3.5% thereafter. c. Cost of equity capital is 12.5% (30 marks)

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