Question 1

1. What does it mean for shareholder in a particular company to have limited liability?

2. An investors required rate of return on preference shares is 12%. If the dividend received annually is GH4.75, what is the price of the preference share?

Question 2

1. A preference share sells for GH25 and pays dividend of GH2.50. What is the shares required rate of return?

2. You are a common stockholder of MD company limited. You are paid dividend of GH6.00 every year and the price of MD company stocks is GH150. If the required rate of return is 14%, what is the value of the stock?

Question 3

1. Given the following data, calculate of price of the common stock.

Required return 10%

Dividend GH1.00

Growth rate 5%

2. If the growth rate increases to 6% and the dividend remain GH1.00. What should be the price of the stock?

(b ii) If the required return declines to 9% and the dividend remain GH1.00, what should be the stock price?

Question 4

The expected dividend per share on the equity share is GH4.00. The dividend per share has grown over the past 10 years at the rate of 3% per year. What is the value of the equity share if the required rate is 12%?