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• Course • Financial Management - FIN3701 (FIN3701) • Institution • University Of South Africa (Unisa) • Book • Principles of Managerial Finance
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• Course • Financial Management - FIN3701 (FIN3701) • Institution • University Of South Africa (Unisa) • Book • Principles of Managerial Finance

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  • April 15, 2024
  • 16
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

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Exam (elaborations)
FIN3701 Assignment 2 (COMPLETE ANSWERS)
Semester 1 2024 (505104) - DUE 24 April 2024




Course

 Financial Management - FIN3701 (FIN3701)
 Institution
 University Of South Africa (Unisa)
 Book
 Principles of Managerial Finance


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billclinton tindi
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,
, FIN3701 Assignment 2 (COMPLETE ANSWERS) Semester 1 2024
(505104) - DUE 24 April 2024 ;100% TRUSTED workings, explanations
and solutions. for assistance Whats-App.......0.6.7..1.7.1..1.7.3.9 ..........




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)

To calculate the current price of Titan Mining Corporation's ordinary share,
we can use the dividend discount model (DDM). The DDM calculates the
intrinsic value of a stock based on the present value of its future
dividends. Given that the dividends are expected to grow at a constant
rate indefinitely from 2022 onwards, we can use the Gordon Growth Model
to find the current price.

The formula for the Gordon Growth Model is:

�0=�1�−�P0=r−gD1

Where:

 �0P0 = current price of the stock

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