Wk_6 - Valuation_of_Debt_and_Equity_(Part II)_Answers.pdf - FINC 2011 Tutorial Solutions Topic Four Valuation of Debt and Equity(Part II Semester 2 2019

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FINC 2011 Tutorial Solutions Topic Four: Valuation of Debt and Equity (Part II) Semester 2, 2019 Question One Samsung’s outstanding preference shares are currently selling in the market for 44,100 Korean Won (KRW). They reported total earnings of KRW 243.77 trillion, return on equity of 16% p.a. and a retention rate on earnings of 32%. Annual dividends on ordinary and preference shares were 4,845 Won and 3,961 Won, respectively. What is the value of preference shares to you if you expect a 10.4% p.a. rate of return? You like the new range of Samsung S10 phones and Galaxy watches, so should you purchase more preference shares or not at this moment?

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