On 1 January 2003, Hofinger Ltd has ordinary shares, currently trading at 320 cents and a number of classes of preference shares that include the following:
Issue A: 14% Redeemable Preference shares of R2, redeemable at a premium of 10% on 31 December 200. Investors currently require a return of 11% on this category of investment.
Issue B: 7% Preference shares of R5, convertible into ordinary shares at the rate of one ordinary share for every five preference shares on 31 December 2006, at the option of the preference shareholder, Investors currently require a return of 15% on this category of investment. It is estimated that the share price on 31 December 2006 will be 450 cents.
Issue C: 4% Participating Preference shares of R1, that entitle the holder, in addition to the 4%, to 40% of the dividend paid to ordinary shareholders. Investors currently require a return of 13% on this category of investment. The next dividend expected is 35 cents per ordinary share and dividends are expected to grow by 5% per year.
(a) Calculate the value of each class of preference share.
(b) Calculate the value of an ordinary share, based on the information provided.