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Mongo Ltd. currently pays a dividend of Sh.4 per share. The dividend is expected to grow at 15% per annum for the first 3 years,...
(Solved)
Mongo Ltd. currently pays a dividend of Sh.4 per share. The dividend is expected to grow at 15% per annum for the first 3 years, then at 10% per annum for the next 3 years, after which the dividend will grow at 5% per annum to perpetuity. The required rate of return for the ordinary share is 18%.
Required:
The intrinsic value of the ordinary share.
Date posted:
March 30, 2022
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Answers (1)
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Max Enterprises Ltd. had the following pattern of earnings per share (EPS) over the last five years:
(Solved)
Max Enterprises Ltd. had the following pattern of earnings per share (EPS) over the last five years:
The company maintained a constant dividend payout ratio of 40%. The company's required rate of return is 13%.
Required:
The company's theoretical value of the share
Date posted:
March 30, 2022
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Answers (1)
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Summit Ltd. issued a new bond five years ago.
The bond was sold at par (Sh 1,000) and has a coupon rate of 12% and a...
(Solved)
Summit Ltd. issued a new bond five years ago.
The bond was sold at par (Sh 1,000) and has a coupon rate of 12% and a maturity of 30 years.
Coupon payments are made semi-annually. The interest rate has currently gone down to 10%.
Required:
(i) The current price of the bond.
(ii) The current yield to maturity of the bond.
(iii) The capital gain on the bond.
Date posted:
March 30, 2022
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Answers (1)
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Zedi Ltd. is forecasting a growth rate of 12% per annum for the next 2 years. The growth rate is likely to fall to 10%...
(Solved)
Zedi Ltd. is forecasting a growth rate of 12% per annum for the next 2 years. The growth rate is likely to fall to 10% for the third and fourth years. After that, the growth rate is expected to stabilise at 8% per annum. The company has just paid a dividend of Sh.1.50 per share and the investors' required rate of return is 16%.
Required:
The intrinsic value per share of Zedi Ltd.
Date posted:
March 30, 2022
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Answers (1)
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Malikia Guyo borrowed Sh.1, 000,000 from Huduma Bank at an annual compound interest of 14% on the reducing balance. The loan was repayable in annual...
(Solved)
Malikia Guyo borrowed Sh.1, 000,000 from Huduma Bank at an annual compound interest of 14% on the reducing balance. The loan was repayable in annual instalments over a period of four years. The installments were payable at end of the year.
Required:
A loan amortisation schedule.
Date posted:
March 30, 2022
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Answers (1)
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At the beginning of year 2008, James Chiro deposited Sh.1,000,000 in an investment account which earned compound interest at 15% per annum. At the beginning...
(Solved)
At the beginning of year 2008, James Chiro deposited Sh.1,000,000 in an investment account which earned compound interest at 15% per annum. At the beginning of each subsequent year, James Chiro deposited a further Sh.500,000 in the same account.
Required:
(i) The amount of money in the investment account by the end of year 2012
(ii) The percentage interest earned over the investment period.
Date posted:
March 30, 2022
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Answers (1)
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Bamba Ltd. has constructed a commercial building in an upmarket location in your capital city which the management intends to sell at Shs .8,400,000. However,...
(Solved)
Bamba Ltd. has constructed a commercial building in an upmarket location in your capital city which the management intends to sell at Shs .8,400,000. However, a prospective tenant has offered to rent the offices for 8 years at a fixed annual rent of Sh. 160,000. At the end of the eighth year, the building will be sold.
A real estate adviser estimated that the price of the building will increase by 3% per annum. The company's cost of capital is 5%.
Required:
Advise the management of Bamba Ltd. on whether to sell the building now or rent out the offices.
Date posted:
March 30, 2022
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Answers (1)
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Shadrack Chando borrowed Sh.80,000 from XYZ commercial bank at an interest rate of 1.25% compounded monthly. The loan is to be amortized using the reducing...
(Solved)
Shadrack Chando borrowed Sh.80,000 from XYZ commercial bank at an interest rate of 1.25% compounded monthly. The loan is to be amortized using the reducing balance method and be repaid in 12 equal monthly installments payable at the end of each month.
Required:
A loan amortization schedule.
Date posted:
March 30, 2022
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Answers (1)
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Explain how a ranking conflict between the net present value (NPV) and the internal rate of return (IRR) can be resolved.
(Solved)
Explain how a ranking conflict between the net present value (NPV) and the internal rate of return (IRR) can be resolved.
Date posted:
March 30, 2022
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Answers (1)
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John Matata has just borrowed Sh.220,000 from a bank payable at 12% per annum compounded annually to be repaid in six equal annual instalments.
(Solved)
John Matata has just borrowed Sh.220,000 from a bank payable at 12% per annum compounded annually to be repaid in six equal annual instalments.
These payments are to be sufficient to repay the principal amount together with interest.
Required;-
The loan amortization schedule.
Date posted:
March 30, 2022
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Answers (1)
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“Despite the large investment in the stock exchange and the various government incentives, only a few companies are listed at the stock exchange of the...
(Solved)
“Despite the large investment in the stock exchange and the various government incentives, only a few companies are listed at the stock exchange of the three East Africa Countries“. This was the opening remark by the guest speaker in a seminar whose theme was “Developing our capital market.”
Required:
i) The advantage of being listed at the stock exchange.
ii) Highlight four factors that may hinder companies from being listed at the stock exchange.
Date posted:
March 30, 2022
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Answers (1)
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Discuss the role of a capital markets authority in the development of a country’s financial markets.
(Solved)
Discuss the role of a capital markets authority in the development of a country’s financial markets.
Date posted:
March 30, 2022
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Answers (1)
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Explain the main factors behind the rapid development of capital markets in your country.
(Solved)
Explain the main factors behind the rapid development of capital markets in your country.
Date posted:
March 30, 2022
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Answers (1)
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Distinguish between "financial gearing" and "operating gearing".
(Solved)
Distinguish between "financial gearing" and "operating gearing".
Date posted:
March 30, 2022
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Answers (1)
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Outline the factors that contribute to the slow growth of capital markets in many emerging economies.
(Solved)
Outline the factors that contribute to the slow growth of capital markets in many emerging economies.
Date posted:
March 30, 2022
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Answers (1)
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Distinguish between “untraded debt” and “floating-rate debt”.
(Solved)
Distinguish between “untraded debt” and “floating-rate debt”.
Date posted:
March 30, 2022
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Answers (1)
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Briefly explain why companies list their shares on more than one stock exchange.
(Solved)
Briefly explain why companies list their shares on more than one stock exchange.
Date posted:
March 30, 2022
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Answers (1)
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Explain three measures that developing countries could implement in order to improve their financial markets.
(Solved)
Explain three measures that developing countries could implement in order to improve their financial markets.
Date posted:
March 30, 2022
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Answers (1)
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Explain the factors that influence the type of finance sought by a manufacturing company.
(Solved)
Explain the factors that influence the type of finance sought by a manufacturing company.
Date posted:
March 30, 2022
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Answers (1)
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Bidii Ltd expects a return on investment (ROI) of 24 % on proposed investment projects whose total cost is 5,000,000. In order to finance these...
(Solved)
Bidii Ltd expects a return on investment (ROI) of 24 % on proposed investment projects whose total cost is 5,000,000. In order to finance these investment projects the company is considering two options.
Option one
Issue 500,000 ordinary shares at a par value of sh. 10 each.
Option two
Issue 250,000 ordinary shares at a par value of sh. 10 each and obtain the balance through a bank loan at an interest rate of 15% per annum.
The rate of corporation tax is 30%
Required:
Determine the effect of the two financing options on the earnings available to shareholders and hence advise the company on the best financing option.
Date posted:
March 30, 2022
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Answers (1)