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FIN2601 EXAM EXPECTED ANSWERS SEM 2 OF 2024(5/11/2024)
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THIS DOCUMENT CONTAINS EXPECTED QUESTIONS AND ANSWERS TO FIN2601 SEM 2 OF 2024 EXAM USE IT AS A GUIDE
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Whitehall Gardens pays an annual dividend that is expected to grow by 4,1% per year. If the share has amarket rate of return of 12,6% and currently sells for R38,20 per share, what is the expected amount of
the next dividend?
a.
R2,12
b.
R3,25
c.
R4,81
d.
R1,67
Question 2
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AgribusinessQuest last dividend paid was R2 with a dividend growth rate expected to remain at 15% for
two years, then grow at 10% for one year, and finally settle at a constant growth rate of 5%. The
company's shares have a market beta of 2, with a market risk premium of 3% and a risk-free rate of 5%.
What is the company’s current share price?
a.
R50,92
,b.
R61,90
c.
R43,58
d.
R33,54
[11/05, 07:51] +27 67 777 3952: ProductionDesign made two announcements concerning its ordinary
share value. First, the company announced that the next annual dividend will be R1,75 per share.
Secondly, all dividends after that will decrease by 1,5% annually. What is the maximum price you should
pay for a share today if you require a 14% rate of return?
a.
R 9,67
b.
R11,29
c.
R12,52
d.
R18,75
,Question 4
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Electronics & Batteries announced today that it will start paying annual dividends next year. The first
dividend will be R1,23 per share. The dividends for the next four years will be R1,15, R1,20, R1,50, and
R1,60 per share, respectively. After this period, dividends are expected to grow by 4% annually. How
much would you be willing to pay for one share of this stock today if you require an 8,5% rate of return?
a.
R27,86
b.
R32,32
c.
R29,79
d.
R36,98
[11/05, 07:53] +27 67 777 3952: Wares Merchandise's ordinary shares are trading at R44,96 per share,
with a market rate of return of 12,8%. The company just paid an annual dividend of R1,04 per share.
What is the dividend growth rate?
, a.
9,45%
b.
8,30%
c.
11,04%
d.
10,25%
Question 6
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HealthWise, a pharmaceutical company, has never paid a dividend. Its current free cash flow (FCF) of
R400 000 is expected to grow at a constant rate of 5%. The weighted average cost of capital (WACC) is
12%. What is the company’s estimated value of operations?
a.
R 420 000
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