QUESTIONS AND
ANSWERS
FOR ASSISTANCE CONTACT
EMAIL:gabrielmusyoka940@gmail.com
,UNIVERSITY EXAMINATIONS
January/February 2021
INV3701
Investments Equity Asset Valuation
70 marks
Duration: 3 hours
This examination paper consists of 21 pages.
INSTRUCTIONS
1. This examination paper consists of the following two sections:
SECTION A Multiple-choice questions
• Use the space provided to answer the questions in this section.
• In each instance, circle the multiple-choice answer you select on the
answer sheet.
SECTION B Long questions
• Use the space provided to answer the questions in this section.
• Show all your calculations in the space provided.
2. Make sure that you answer all the questions.
3. Please write legibly and clearly.
4. Do not use SMS language.
5. Use four decimal places in your calculations and round off your final answer to two decimal
places.
Honesty declaration
You must submit a declaration of honesty in which you declare that the work you submit is your own. This
declaration will be the first page you see when you start with the assessment. You will not be able to access
the examination paper without submitting this declaration.
The declaration is as follows:
I declare that the work I am submitting for assessment is my own and that I neither worked in a group nor
consulted anybody in order to complete the assessment.
Instructions regarding The Invigilator
Take note that the instructions regarding The Invigilator and the QR code for the module are on page 2.
Instructions regarding myUnisa
The examination will be conducted as a take-home examination based on an examination question paper.
The examination will be managed on the myUnisa platform.
Follow the next steps to submit your examination answer file:
1. Click on the myAdmin tab in the top navigation pane.
2. In the Assessments submenu, click on Assessment Info in the drop-down list.
3. Locate Unisa Summative Assessments at the bottom of the list.
4. Find the portfolio number that corresponds with the module.
5. Click on the Submit link in the Action column.
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, CONFIDENTIAL
Page 2 of 21 INV3701
JAN/FEB 2021
The Invigilator
Follow these instructions on the day of the examination:
o Keep your cell phone fully charged for the duration of the assessment.
o Log in to The Invigilator if you have not done so yet. You have to be connected to the
internet in order to log in.
o Scan the QR code provided below once the examination starts. If you encounter difficulty
in scanning the QR code, you can enter the QR access code indicated at the bottom of
the QR code to start the online invigilation. Ensure that you are connected to the internet
if you need to enter the QR access code at the bottom of the QR code.
o Once the QR code has been scanned, avoid any disturbances by putting your phone on
airplane mode if possible. No internet connection is needed during the assessment.
o Keep the Invigilator open at all times on your cell phone during the assessment.
o You may place your cell phone next to you. Your cell phone does not need to face you,
but it should be close enough so that you can hear the notifications from The Invigilator.
o The Invigilator will notify you when an action is required. In order to receive notifications,
do not put your cell phone on silent mode and ensure the media volume is turned up.
o When an action is required, you will hear a beep notifying you of an instruction. You must
act on the instruction promptly.
o When the examination time is over, focus on scanning and uploading your script to
myUnisa. The uploading of your script is time sensitive.
o Once you have uploaded your script to myUnisa, you may switch on the data on your
cell phone to start the uploading process on The Invigilator.
o Good luck!
QR access code for INV3701
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, CONFIDENTIAL
Page 3 of 21 INV3701
JAN/FEB 2021
SECTION A: MULTIPLE-CHOICE QUESTIONS (10 MARKS)
This section consists of five questions that are worth two marks each.
Circle the answer you select for each multiple-choice question (questions 1 to 5)
1. An equity analyst has been instructed to use absolute valuation models, and not
relative valuation models, in his analysis. Which of the following is not an example
of an absolute valuation model?
1. residual income model
2. dividend discount model
3. price-to-earnings market multiple model
2. An analyst estimates equity value by discounting free cash flow to equity (FCFE) at
the weighted average cost of capital (WACC) in the FCFE model and estimates firm
and equity value by discounting free cash flow to the firm (FCFF) at the required
return on equity in the FCFF model. The analyst will most likely …
1. overestimate equity value with the FCFE model and underestimate firm value
and equity value with the FCFF model.
2. underestimate equity value with the FCFE model and overestimate firm value
and equity value with the FCFF model.
3. overestimate equity value with the FCFE model and overestimate firm value
and equity value with the FCFF model.
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