SECTION C Answer any TWO questions in this section. Each whole question carries TWENTY FIVE marks 1. a. The following table provides some information about a company in steady state Earnings Per Share Dividends Per Share Capital expenditure Depreciation Debt Net Operating Working Capital Number of shares outstanding Beta Steady state growth rate Risk-free rate Expected market return 5.0 4.0 100m 80m 1,000m 50m 100m 0.9 3% 4% 10% i Estimate the value per share using the dividend discount model (4 marks) ii. Estimate its return on equity and current book value of equity per share. (4 marks) iii. Estimate the value per share using the FCFE model. (4 marks) iv. How do you explain the difference in the values obtained in and () above? Which of these values would you use to compare with the market price in order to identify whether the stock is under-or over- valued? (5 + 3 marks) b. Explain why unlisted firms are more difficult to value than listed firms (5 marks) SECTION C Answer any TWO questions in this section. Each whole question carries TWENTY FIVE marks 1. a. The following table provides some information about a company in steady state Earnings Per Share Dividends Per Share Capital expenditure Depreciation Debt Net Operating Working Capital Number of shares outstanding Beta Steady state growth rate Risk-free rate Expected market return 5.0 4.0 100m 80m 1,000m 50m 100m 0.9 3% 4% 10% i Estimate the value per share using the dividend discount model (4 marks) ii. Estimate its return on equity and current book value of equity per share. (4 marks) iii. Estimate the value per share using the FCFE model. (4 marks) iv. How do you explain the difference in the values obtained in and () above? Which of these values would you use to compare with the market price in order to identify whether the stock is under-or over- valued? (5 + 3 marks) b. Explain why unlisted firms are more difficult to value than listed firms