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Following scenario relates to the questions $3,4$ and $5.$ Bloom Co is listed on the stock market and has increased earnings over the last year. As a result, the board of directors has increased the dividend payout ratio from $36\%$ for the year to June $20$X$4$ to $37\mathrm{.}1\%$ for the year to June $20$X$5.$ Bloom Co has a cost of equity of $13\%.$ The following information is also available:

Year to June $20$X$4$ Earnings $-$ $$12,100$ Ordinary Shares $-$ $$12,700$

Year to June $20$X$5$ Earnings $-$ $$7,000$ Ordinary Shares $-$ $$7000$

The nominal value of ordinary shares of Bloom Co is $$0\mathrm{.}50$ per share. Listed companies similar to Bloom Co$.$ have an earnings yield of $9\mathrm{.}2\%$

$3.$ What is the equity market value of Bloom Co$.$ using the Dividend growth model?

a$)$ $$39$m

b$)$ $$92$m

c$)$ $$97$m

d$)$ $$105\mathrm{.}5$m

$4.$ What is the equity market value of Bloom Co$.$ using the Earnings yield method?

a$)$ $$12$m

b$)$ $$105\mathrm{.}5$m

c$)$ $$132$m

d$)$ $$138$m

$5.$ The following statements relate to the Dividend Growth Model $($DGM$)$ and the Earnings Yield Method $($EYM$)$

i$.$ The EYM uses profit $($rather than cash$)$ so is the preferable method for Bloom Co$.$

ii$.$ In an acquisition context, the EYM is used to value a minority shareholding in a target company. Are all the statements true or false?

a$)$ Both statements are true

b$)$ Both statements are false

c$)$ Statement $1$ is true and Statement $2$ is false

d$)$ Statement $2$ is true and Statement $1$ is false

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