M J Morris is a prosperous unquoted company, whose owners are also the directors. The directors have decided to sell their business, and have begun a search for organisations interested in its purchase. They have asked for your assessment of the price a purchaser might be expected to offer.
Information relevant to your assessment is as follows:

The profit after tax and interest but before dividends over the last five years has been:

The most recent annual dividend was £80,000 and the dividend is expected to grow at 10% per year. The company's five year plan forecasts an after-tax profit growth of 10% per annum over each of the next five years.

As part of their preparation to sell the company, the directors of M J Morris have had the fixed assets re-valued by an independent expert, who made assessments for:

Land/Buildings

2,000,000
Plant/equipment
350,000
Motor Vehicles
40,000

The average dividend yield and P/E ratio of three public companies in the same industry as M J Morris over the last three years has been 12% for the dividend yield and 10.1 for the P/E ratio. Given the level of risk in this industry, investors are looking for a 20% total return per annum.

(a) Make calculations of the value of the company (i.e., the total value of the shares) based on:
a. Assets
b. Dividends
c. Profits

(b) State what advice you would offer the directors as to the realistic value of their company
(c) If you were advising a prospective purchaser, outline the type of analysis and valuation method you would recommend.