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COURSE ; EQUITY AND FIXED INCOME Question 1 (4 marks) (show principles and calculations )

COURSE ; EQUITY AND FIXED INCOME Question 1 (4 marks) (show principles and calculations )

COURSE ; EQUITY AND FIXED INCOME 

Question 1 (4 marks)  (show principles and calculations )

1.1  Kimberley Limited is expected to pay a dividend of 125 cents one year from today. You believe it can be sold for $35 one year from today. If the required return is 14%, what is the most you would pay today for Kimberley Limited? (2) 

1.2  FISH Limited's preferred shares will pay a dividend of 650 cents one year from today and every year thereafter. If the required return on its preferred shares is 7%, how much is the share worth? (2)

Question 2 (6 marks) (show principle and calculations )

Rustenburg Mining Limited just paid a dividend of 400 cents per share. Investors require a 12% return, and dividends are expected to grow at 3% per year, forever. 

2.1  What is the value of Rustenburg's share today? (2)

2.2  What is the price of Rustenburg's share expected to be one year from today? (2)

2.3  What is the expected capital gains yield for Rustenburg's stock? (1)

2.4  What is the expected dividend yield? (1)

Roshan kumar 08-Nov-2017

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