valuation?, page-3

ROE of 15% means, ignoring debt, the company is spitting back 15 cents for every dollar that I invest. To compensate me for the risk of buying a small cap like RQL, I want a return on my money of well above 10% - possibly 12 - 14% would be reasonable. Given that the company has a ROE of 15% I can afford to pay a small amount above the equity value. I have calculated that to be a premium of about 50%, so on base equity of about $73m, I might pay $110m to buy the company (or 45 cents per share on a fully diluted basis).