3 You are an accountant with a practice that includes a large proportion of individual clients, who often ask for information about traded investments. You have extracted the following data from a leading financial newspaper.

The estimated before tax return on equity required by investors in Crazy Games plc is 20%.

Required Draft a report for circulation to your private clients which explains:

(a) the factors to be taken into account (including risks and returns) when considering the purchase of different types of traded investments.

(b) the role of financial intermediaries, and their usefulness to the private investor.

(c) the meaning and the relevance to the investor of each of the following:
(i) Gross dividend (pence per share)
(ii) EPS (iii) Dividend cover Your answer should include calculation of, and comment upon, the gross dividends, EPS and dividend cover for Buntam plc and Zellus plc, based on the information given above.

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(i) Stock Price Buntam plc 160p P:E ratio 20 Dividend yield (% gross) 5 Zellus plc 270p 15 3.33 (ii) Earnings and dividend data for Crazy Games plc are given below: 1993 1994 1995 1996 1997 EPS 5p 7p 10p 12p Div. per share (gross) 3p 3p 3.5p 5p 5.5p