100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
FIN3701 Assignment 2 Semester 1 - DUE 24 April 2024 CA$3.92   Add to cart
Quickly navigate to
Preview
  2.  
  3. University Of South Africa
  4.  
  5. FIN3701 - Financial Management (FIN3701)

Exam (elaborations)

FIN3701 Assignment 2 Semester 1 - DUE 24 April 2024
 20 views  1 purchase
  • Course
  • FIN3701 - Financial Management (FIN3701)
  • Institution
  • University Of South Africa
  • Book
  • Financial Management

FIN3701 Assignment 2 Semester 1 2024 (Unique nr. 505104) - DUE 24 April 2024 ;100 % TRUSTED workings, explanations and solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)........... QUESTION 1 [10 marks] Bonga currently has a portfolio of ordinary shares represe...

[Show more]

Preview 3 out of 16  pages

Document information

  • April 6, 2024
  • 16
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

Subjects

  • fin3701 assignment 2 semester 1 2024 nr 505104

Connected book

book image

Book Title:

Author(s):

  • Edition:
  • ISBN:
  • Edition:

More summaries for

  • FIN2601 Assignment 2 COMPLETE ANSWERS) Semester 2 2024 - DUE September 2024 ; 100% TRUSTED Complete, trusted solutions and explanations.
  • FIN2601 Assignment 1 COMPLETE ANSWERS) Semester 2 2024
  • FIN3701 Assignment 2 COMPLETE ANSWERS) Semester 2 2024 (232193) - DUE 16 September 2024
All for this textbook (39)

Written for

  • University of South Africa
  • FIN3701 - Financial Management (FIN3701)
All documents for this subject (56)

Seller

avatar-seller
LIBRARYpro

Reviews received

Content preview

FIN3701
ASSIGNMENT 2 SEMESTER 1 2023




FIN3701 Assignment 2

, Financial Management
FIN3701
Assignment 2
Semester 1 2024




Unique Number: 505104
Due Date: 24 April 2024


QUESTION 1 [10 marks]


Bonga currently has a portfolio of ordinary shares representing several different companies.
Bonga considers it to be a well-balanced investment portfolio, but he wants to reduce the
overall risk of the portfolio a bit more by including ordinary shares from Titan Mining
Corporation.


The following information on Titan Mining Corporation is available:


For the period 2017 to 2020, the company paid the following dividends per year
respectively: R3,14; R3,55; R3,89; and R3,95.
The 2021 dividend is expected to increase by the average growth rate of the dividends
between 2017 and 2020, and the dividend will increase by 10% per year indefinitely from
2022 onwards. Bonga requires a return of 15% on his investment portfolio and is not
prepared to pay more than R52,00 per ordinary share of Titan Mining Corporation.


REQUIRED:


1.1 Calculate the current price of Titan Mining Corporation’s ordinary share. (8 marks)


1.2 Should Bonga purchase Titan Mining Corporation shares to include in his investment
portfolio? Provide reasons for your answer. (2 marks)




KINDLY NOTE THAT THERE ARE TWO COMPULSORY ASSIGNMENTS FOR THE FIRST
SEMESTER.

, QUESTION 2 15 MARKS


The power systems company Raging Volts is currently 70% equity financed and aims to
raise R2 million to fund a set of attractive investment opportunities. Debt financing may be
obtained at an after-tax cost of 16%.


The company’s management wants to introduce 40% debt in the capital structure while
keeping the cost of each financing source together with its market value the same. Ordinary
shares are currently selling for R30 per share.


The company paid a dividend (Do) of R1,50 per share in the previous financial year and had
a growth rate of 7% over the past few years. It is expected that this growth rate will be
maintained in future. The company’s tax rate is 29%. The market value of power systems
company Volts is R2 000 000.


REQUIRED:


1.1 Calculate the component costs associated with capital investment financing. (3 marks)


2.2 Calculate the weighted average cost of capital (WACC), the break-point of equity and
the break-point of debt under the current structure. (4 marks)


2.3 Calculate the WACC, the break-point of equity and the break-point of debt under the
proposed structure. (4 marks)


2.4 Calculate the number of shares under the current structure. (2 marks)


2.5 Calculate the number of shares under the proposed structure. (2 mark)

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller LIBRARYpro. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for CA$3.92. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

79373 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
CA$3.92  1x  sold
  • (0)
  Add to cart