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a.According to the latest annual report, Getafix Plc has total assets of 1.2 billion and total liabilities of 400 million. The company has 100 million shares outstanding.

• i.Determine the net asset value (NAV) per share of Getafix Plc. (4 marks)
• ii.Considering that the company's stock price is currently 9.50, does the NAV method indicate that it would be a good purchase? (2 marks)

b.The dividend pay-out ratio of Getafix is 24%, its cost of equity (RE) is equal to 12% and its expected perpetual growth rate (g) is 4%.

• i.What is the theoretical price-to-earnings (P/E) ratio on the basis of a model constructed using Gordon's growth formula? (4 marks)
• ii.If Getafix Plc's actual prospective PE ratio is 3.6, would you recommend that investors buy the company's shares? (3 marks)

c.You have decided to compare relative valuation ratios for Getafix Plc with the average ratios within the industry. The table below summarises your findings. Based on the assumption that Getafix Plcs risk levels and growth prospects are comparable with those of other companies in the industry, would you recommend investing in this company based on the statistics presented in the table? Explain your answer. (6 marks)

Getafix PlcIndustry averageProspective price-to-earnings ratio3.602.70Price-to-book ratio1.621.18Price-to-sales ratio2.942.46

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