You are an accountant with a practice that includes a large proportion of individual clients, who often ask for information about traded investments. You have extracted the following data from a leading financial newspaper.
(i)

(ii) Earnings and dividend data for Crazy Games plc are given below:

The estimated before tax return on equity required by investors in Crazy Games plc is 20%.
Required
Draft a report for circulation to your private clients which explains:
(a) The factors to be taken into account (including risks and returns) when considering the purchase of different types of traded investments.
(b) The role of financial intermediaries, and their usefulness to the private investor.
(c) The meaning and the relevance to the investor of each of the following:
(i) Gross dividend (pence per share)
(ii) EPS
(iii) Dividend cover Your answer should include calculation of, and comment upon, the gross dividends, EPS and dividend cover for Buntam plc and Zellus plc, based on the information given above.

Stock Price Dividend yield (% gross) Buntam plc Zellus plc 160p 270p PE ratio 20 15 3.33 2011 2012 2015 12p 3p 3.5p5p 5.5p 2013 2014 EPS 5p 6p