INV2601 ASSIGNMENT 1 SEMESTER 1 2023

INV2601 ASSIGNMENT 1 SEMESTER 1 2023 QUESTIONS AND ANSWERS.n Step 1: Expected dividends D0 = 0.80 D1 = 0.80 (1+0.20) = 0.96 D2 = 0.96 (1+0.20) = 1.152 D3 = 1.152 (1+0.05) = 1.2096 Step 2: Terminal value (T2) T2 = D3 (ke−g) = 1.2096 (0.08−0.05 ) = 40.32 Step 3: Present value of dividends and terminal value. Using financial calculator: CF0 = 0 CF1 = 0.96 CF2 = 1.152 + 40.32 CFi = 8% Comp PV = 36.44 Explanation A and C are the odd ones out. We use market indices to predi...