Question One ATEC Ltd is a player in the local market. The company's common stock is trading
Question:
Question One
ATEC Ltd is a player in the local market. The company's common stock is trading at sh 65 per
share. The company's most recent is sh 3 per share. The required rate of return on investments of
similar risk is 10%. In order to advise investors, you need to estimate the value of the share under
the following scenarios;
i.
If dividends are expected to grow at zero per cent indefinitely
(1 Mark)
ii.
If dividends are expected to grow at 2% indefinitely
(1 Mark)
iii.
If dividends are expected to grow at 2% for the first 5 years, then the growth rate increase
to 5% indefinitely.
(5 Marks)
iv.
What would you advise an investor who owns these shares, under the third (iii) scenario
Financial reporting, financial statement analysis and valuation a strategic perspective
ISBN: 978-0324789416
7th Edition
Authors: James M Wahlen, Stephen P Baginskl, Mark T Bradshaw