The most recent financial data for Morena limited disclosed the following: Dividend per Share KSh. 3.00...
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The most recent financial data for Morena limited disclosed the following: Dividend per Share KSh. 3.00 Expected Annual dividend growth rate 6% Current required rate of return 15% The company is considering a variety of proposals in order to redirect the firm's activities. The following for alternatives are been suggested. i. Do nothing in which case the key financial variables will remain unchanged. Invest in a venture that will increase the dividend growth rate to 7% and lower the required rate of return to 14% Eliminate an unpredictable product line. This action will increase the dividend growth rate to 8% and raise the required rate of return to 17% ii. iii. iv. Acquire a subsidiary operation from another company. This action will increase the dividend growth to 9% and the required rate of return to 18%. Required: For each of the proposed actions, determine the resulting impact on price and recommend the best alternatives. (8 marks) The most recent financial data for Morena limited disclosed the following: Dividend per Share KSh. 3.00 Expected Annual dividend growth rate 6% Current required rate of return 15% The company is considering a variety of proposals in order to redirect the firm's activities. The following for alternatives are been suggested. i. Do nothing in which case the key financial variables will remain unchanged. Invest in a venture that will increase the dividend growth rate to 7% and lower the required rate of return to 14% Eliminate an unpredictable product line. This action will increase the dividend growth rate to 8% and raise the required rate of return to 17% ii. iii. iv. Acquire a subsidiary operation from another company. This action will increase the dividend growth to 9% and the required rate of return to 18%. Required: For each of the proposed actions, determine the resulting impact on price and recommend the best alternatives. (8 marks)
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The detailed answer for the above question is provided below i Do nothing Dividend per Share KSh 300 ... View the full answer
Related Book For
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott
Posted Date:
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