Mike and Kate are conservative investors and now realize that to beat the high inflation rate and achieve their financial target, they need to construct a portfolio that invests in high-growth securities.

 Mike and Kate are considering the following two shares for equity investment:  

Shares issued by Fishman Limited

-        share price AUD46.00

-        projected earnings per share AUD3.90

-        projected dividend per share nil

-        average price-earnings ratio for similar companies is 9.5.

 

Shares issued by Manmade Limited

-        share price AUD54.00

-        projected earnings per share AUD5.50

-        projected dividend per share AUD1.00

-        average price-earnings ratio for similar companies is 10.5.

 

Mike and Kate would like some advice on whether or not they should invest in either or both of these two shares. Make your recommendation based upon a valuation method.  (4 marks)

 To further diversify the investment portfolio, Mike and Kate are also considering the following corporate bonds:

 

The corporate bonds issued by Seeds Limited. 

The bonds have a remaining term of 8 years, a 5% coupon (semi-annual) and a face value of AUD1,000.  The yield on similar bonds is 7%. The current market price for this bond is $865.

With reference to price and value, comment on this potential investment. (3 marks)

 If Mike and Kate plan to make a further investment of $20,000 in an income-stock fund and a high-growth stock fund, based on their risk preference and financial target, make recommendations on the proportions to be allocated into these two funds. Provide reasons for your suggested allocation. (3 marks)

Answer rating: 100% (QA)

Based on the provided information here are my recommendations Equity Investment 1 Shares issued by F... View the full answer