1. You are considering an investment in Assam Asset Management. Assam tells you that the last dividend that they paid was $2.35 per share and they have been increasing the dividend at 1.5% a year lately. If your required rate of return is 7%, what would you be prepared to pay per share for an investment?

2. Elite Engineering has a market value of equity of $18.5 million and 200,000 preference shares in issue worth $2 million. The company’s debt is $9 million. Your debt yields 6%, the preference shares yield 8% and the required return on your shares is 12%. If your company pays taxes at 32% what is the weighted average cost of capital (WACC) of the company?
3. Nutty Nougat Factory Ltd last paid a dividend of $2.50 and has been growing the dividend at 1% a year lately. If the share price is $28.70 what is the expected rate of return on the share? If your required rate of return is 10% would you buy or sell?

Answer rating: 100% (QA)

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