c)(i) Using the observed growth rate on DPS, determine the expected share price for Company B on 31 December 2021. Question 2A shareholder of Company B is concerned about the recentperformance of the company. She has collected the followingfinancial information.Year to 31 DecemberRevenue in £'mEarnings per share in penceDividend per share in penceClosing ex-dividend share price in £ 7.2 7.9 6.6CAPM expected return (%)2019 2020 20219.4 9.6 10.262.3 67.4 59.4|34.6 35.6|37.410 12 9The finance director of Company B proposes that it will pay nodividend in 2022, 2023 and 2024. The company will pay adividend per share of 62 pence in 2025. It will then grow at 4%per year in 2026 and beyond.The expected cost of equity of Company B is 10% per year for2022 and onward.Dividend is paid at the end of each year.

Under Dividend Growth Model, P0 = D1 / (r - g) Here, P0 = Price of the Share now D1 = Dividend for…

Answered: Using the observed growth rate on DPS,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question (a) An investor purchased the share of Neptune Corp on 1 Jan 2017 and held the investment until 31 December 2021. Details of Neptune Corp's share price and dividend payout during the period of investment are as follows: Date Share Price 01 jan 2017 8.50 31 Dec 2017 8.80 31 Dec 2018 9.15 31 Dec 2019 9.22 31 Dec 2020 8.87 31 Dec 2021 9.12 Compute: (i) Arithmetic rate of return for 2017, 2018, 2019, 2020 and 2021 separately. (ii) Geometric average rate of return for the entire period of investment from 2017 until 2021. (iii) Logarithmic returns for the entire period of investment from 2017 until 2021. (b) Discuss four differences between investing in stocks and investing in bonds. Dividend 0.30 0.35 0.38 0.22 0.30
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Estimating Share Value Using the ROPI Model Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018, for Humana. Terminal Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal place Reported Horizon period $ millions 2018 2019 2020 2021 2022 Period Sales $56,880 $57,734 $58,600 $59,480 $60,372 2,492 2,542 2,580 2.619 2,658 4,000 4,065 4,126 4,189 4,252 NOPAT NOA $60,976 2,684 4,295 Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate Discount rate (WACC) 19 7.8% Common shares outstanding 135.6 million Net nonoperating obligations (NNO) S(6,161) million NNO is negative because Humana's nonoperating assets exceed its nonoperating liabilities. (a) Estimate the value of a share of common stock using the residual operating income (ROPI) model as of December 31,…
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