Security Analysis & Portfolio management, Other Engineering

ABC Ltd. has an investment opportunity available which will involve a capital outlay in each of
the next 2 years and which will produce benefits during the following 3 years. A summary of the
financial implications of this investment is given below:
Year Cash Flow (Rs ‘000)
1 (1,000)
2 (1,000)
3 100
4 1,300
5 3,100
ABC Ltd. currently has 1,00,000 shares in issue. The dividend just paid was Rs 15 per share.
In the absence of the above investment, dividends are expected at this level for the next 3
years but will then demonstrate perpetual growth of 10 per cent p.a. ABC Ltd. is currently all
equity financed and the required rate of return of the equity investor is estimated to be 18 per
cent. The company has a long established policy of not using any debt finance and, because
of the current depressed state of the stock market, could not in the near future issue new
equity. The only possible way of financing the investment is, therefore, to reduce the
dividend payments made in the next 2 years. Cash received from the new investment will all
be distributed. Growth in dividends @10 per cent will also be maintained because of other
operations.
Required:
a) Calculate the current share price of ABC Ltd.
b) Calculate the share price after the investment has been accepted, assuming the market
knows of the dividend changes that will result from the investment using a Dividend
Valuation Model.
Posted Date: 4/20/2012 12:31:14 AM | Location : United States







Related Discussions:- Security Analysis & Portfolio management, Assignment Help, Ask Question on Security Analysis & Portfolio management, Get Answer, Expert's Help, Security Analysis & Portfolio management Discussions

Write discussion on Security Analysis & Portfolio management
Your posts are moderated
Related Questions
Providing alternative escape routes: The first thing to check is if everyone can turn away from the fire and move safely away from it. For this to be the case there will

Fire safety log book: The occupier's fire safety log book should be checked during an inspection to see that the system is being tested regularly and serviced and maintained a

advantages and disadvantages oh hot and cold die working in the subject of basic mechanical engineering

an electric bulb weighing 15n hangs from a point C by 2 strings AC and BC .string AC is inclined at 60degree to horizontal and BC at 45 degree to vertical.find tension in string.

What is Absolute Return Fund The absolute return strategies develop returns from active management with small or no underlying market exposure, seeking to achieve positive returns

how to develop an algorithm that will accept the names of sales staff members and the total sales for the month.the algorithm must calculate the commission of 3% of the total sales


Shift registers A register is a number of flip-flops arranged in a circuit used for storing data.  A shift register is one that is designed to move the data along the register.


How to calculate the depth of a masonry dam of trapezoidal cross section with height of 24ft,2ft top width,,12 ft base width and weight of concrete 150 lb/ft^3.The resultant pressu