WES546 - Business Finance - Harriet’s Haughty Culture - Flamingo’s Irredeemable Preference Shares - Accounting & Finance Assignment Help

Assignment Task

Question 1: Harriet’s Haughty Culture paid a cash dividend of $0.95 yesterday. This dividend is expected  to grow at a rate of 11% per year for 4 years. After that growth should drop to 5% and  continue at 5% to “infinity.” If the required rate of return on these shares is 14%, what is the  current value of the firm’s shares? 

Question 2: Flamingo’s irredeemable preference shares are selling for $82.50 each and pay $3.25 in  dividends every six months. What is your effective annual expected rate of return if these securities are purchased at the market value? 

Question 3: Hawk Corporations return on equity is 15% and management has plans to retain 25% of earnings for re-investment in the company’s business. The company expects an end of year dividend of $4.60, and the required rate of return is 14%.
a. Calculate the company’s growth rate. 
b. Calculate the value of Hawke shares

Question 4: Due to the current global economic conditions, Canary Ltd stopped its dividend payments. Dividends of $4 are expected to re-commence in 5 years and are expected to increase at a rate of 6% per year thereafter. If the required rate of return is 12%, what is the current value of the firm’s shares?

Question 5: The dividend for King’s ordinary shares is expected to be $1.90 next year. This dividend is expected to grow at a rate of 7% for the following two years. After that growth should drop to 4% and continue at 4% to infinity. If the required rate of return on these shares is 12 %, what is the current value of the firm’s shares?

Question 6: Toucan Ltd is expected to pay its ordinary shareholders a dividend of $1.40 in 1 year’s time. It is projected that these dividends will decline at a rate of 5% for the for-seeable future. If the ordinary share investor’s required rate of return is 11%, estimate the current value of each ordinary share. 

Question 7: What is the value of an irredeemable preference share where the dividend paid is $18 per share and the appropriate discount rate for shares of this risk level is 14%?
 
Question 8: The ordinary shares of NCP Ltd paid $1.32 in dividends last year. Dividends are expected to grow at an 8% annual rate for an indefinite number of years.
a. If NCP’s current market price is $23.50, what is the expected rate of return? 
b. If your required rate of return is 10.5%, what is the value of the share for you? 
c. Should you make the investment? 

Question 8: What is the value of an irredeemable preference share where the dividend paid is $18 per share and the appropriate discount rate for shares of this risk level is 14%? 

Question 9: Solar Company's preference shares are selling for $115.50 and paying $2.30 in dividends per share each quarter. What is your effective annual expected rate of return if you purchase the security at the market price? 

Question 10: Investors require a 15 per cent rate of return on Tussle Company’s shares. What will Tussle’s share value be if the previous dividend was $2 and if investors expect dividends to grow at a constant compound annual rate of 5 per cent? 

Question 11: Knight Company has just paid a cash dividend of $0.20 per share. Investors require a 16% return on investments such as this. What would the share sell for today if the dividend is expected to grow at 20% per year for the next three years and then settle down to 8% per year? 

Question 12: Retro Ltd recently suspended its dividend payments. Management anticipates that dividends of $6 will be restored in four years and that the dividend will be increased at a rate of 6% per year thereafter. If the market required rate of return on similar shares is 13%, what is the price of a Retro Ltd share today? 

Question 13: Given that a firm’s return on equity is 19% and management plans to retain 30 percent of its earnings each year for investment purposes, what will be the firm’s growth rate? If the company has just paid a dividend of $1.25 and the required rate of return is 15%, what is the value of the firm’s shares?



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