Past+Paper - Past Paper SECTION A: EQUITIES Question 1 [12...

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Past Paper SECTION A: EQUITIES Question 1 [12 Marks] a) Calculate the market concentration of a stock market with a market capitalisation of R260 billion whose biggest stocks have market caps as follows (all in R billions): 12.5, 10.2, 10.1, 9.0, 8.4, 6.0, 5.1, 5.0, 3.8, 3.2, 3.1, 3.1, 2.5, 2.2, 2.0. (2 marks) b) Comment on the market concentration of the JSE (3 sentences max, you do not need to give any numbers). (2 marks) c) Briefly explain what a limit order is and also refer to the one risk of placing a limit order (max: 8 lines). (3 marks) d) Johnson Corp. has 28 million shares in issue, of which 5 million are held by its founder, 6 million by large asset managers, 2 million in an employee incentive trust and the remainder by smaller investors. How many of Johnson’s shares are tightly held and what is the percentage of free-float shares? (2 marks) e) Give three reasons why a company may also want to have a listing in another country (dual list). (3 marks) Question 2 [6 Marks; max. 18 lines] Explain the mechanism by which a strengthening Rand will affect the earnings of respectively (1) South African importers and (2) domestic producers for the South African market. Question 3 [5 Marks] Montroux is trading at 1780 cps and has just paid a dividend of 60 cps. Montroux’ growth rate is 5% and its retention ratio is 55%. An appropriate discount rate is 10%. What is the implied present value of growth opportunities (per share) for this company? Show all steps. Question 4 [7 Marks] a) Define free cash flow. (1 sentence, 2 marks) b) Given the following for Alticorp: FCFF: R120 million Equity: R230 million, cost: 14% Tax rate: 25% Net long-term borrowings for the last year: -R25 million Net equity changes for the year: R18 million Interest paid for the year: R8 million Growth rate estimated for Alticorp’s cash flows to equity: 4% Shares in issue: 22.6 million Calculate the value of one Alticorp share. Show all steps. (5 marks) Question 5 [9 Marks] a) Give two advantages of using the P/NAV ratio (2 marks; max: 5 lines).
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Past+Paper - Past Paper SECTION A: EQUITIES Question 1 [12...

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