Assignments_2009 - answers_1_semester 01answers assignment 02

Assignments_2009 - answers_1_semester 01answers assignment 02

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MNF2023/202/1/2009 DEPARTMENT OF FINANCE AND RISK MANAGEMENT AND BANKING FINANCIAL MANAGEMENT (MNF2023) TUTORIAL LETTER 202 MNF2023/202/1/2009 (First semester) STREPIESKODE BAR CODES UNISA P248(A)
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2 MNF2023/202 CONTENTS Page 1 SUGGESTED SOLUTIONS FOR ASSIGNMENT 02 2 ERRATA 3 CALCULATORS 4 EXAMINATION INFORMATION 4.1 Answer books 4.2 Examination format 2 7 7 7 7 7 Dear Student, The purpose of this tutorial letter is to supply you with the correct solutions for Assignment 02. 1 SUGGESTED SOLUTIONS FOR ASSIGNMENT 02 Question 1 The correct option is 3. Using a financial calculator: 1 000 FV 6 N (semi-annual compounding periods, 2 x 3) - 940 PV 60 PMT (1 000 x 12%)/2 [semi-annual coupons] COMPUTE I I = 7.27 (effective semi-annual compounding rate) 7.27 x 2 = 14.54% Textbook reference: Chapter 4 Question 2 The correct option is 4. Using the Gordon model P 0 = g k D - s 1 k s = 0 0 P D g) (1 + + g The growth rate g is calculated from the dividend growth table provided, using R1.24 as the PV and R2.00 as the FV and 5 as the compounding periods N (2009-2005); g = 10%
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3 MNF2023/202 K s = 0 1 P D + g = 160 ) 1 . 0 1 ( 2 + + 0.1 = 11.375% Question 3 The correct option is 4. P/E (price/earnings) ratio = share per Earnings share per price Market Market price of share = P/E ratio × earnings per share = 15 × 2 = 30 Question 4 The correct option is 3. Using formula (7.2) on page 345 of prescribed book: Using P 0 = 1 1 r) (1 D + + 2 2 r) (1 D + + 3 3 r) (1 D + where D 1 , D 2 and D 3 represent the received dividends for years 1-3. D 3 should include the original amount invested; because it is paid out at this point (r represents the required return). Hence, P 0 = 1 0.12) (1 3 + + 2 0.12) (1 4.25 + + 3 0.12) (1 100 6 + + = 81.52 Note: The value of a share is equal to the present value of all expected future cash inflows (dividends). Question 5 The correct option is 4. CCC = AAI + ACP – APP AAI = CCC – ACP + APP (see p 641 of the prescribed textbook) AAI = 120 – 25 + 50 = 145
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4 MNF2023/202 Question 6 The correct option is 3.
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