A Differentiate between the following Growth companies and growth stock (4 marks) Defensive companies and defensive stocks (4 marks) Risk and diversification (4 marks) Fixed income instrument and capital market instrument (3 marks) B Stock XYZ declares a dividend of $2 per share and is currently valued at $125 in the market Based on the stock's dividend history, a broker determines a dividend growth rate for the stock of 5 per year and a discount rate of 7 Calculate the stock current value (3 marks) What would be your recommendation to investors holding this stock (2 marks) C Sea Gardens is a resort company with average risk The industry average Price earnings ratio (P E) for resort companies is 13 If Sea Gardens has earnings per share (EPS) of $1 70, what would be a fair price for its shares (5 marks) D Lynns Investments Limited does not currently pay dividends However, investors expect that in five (5) years, the firm will pay its first dividend of $3 50 per share and will continue to grow at 10 in perpetuity If investors require a 15 annual return on the shares, what should be the current price of Lynns Investments Limited shares to investors (12 marks)

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Posted on Jun 27, 2024

A.Differentiate between the following: Growth companies and growth stock (4 marks) Defensive companies and defensive stocks (4 marks) Risk and diversification (4 marks) Fixed income

A.Differentiate between the following:

Growth companies and growth stock(4 marks)
Defensive companies and defensive stocks(4 marks)
Risk and diversification(4 marks)
Fixed income instrument and capital market instrument(3 marks)

B.Stock XYZ declares a dividend of $2 per share and is currently valued at $125 in the market. Based on the stock's dividend history, a broker determines a dividend growth rate for the stock of 5% per year and a discount rate of 7%.

Calculate the stock current value(3 marks)
What would be your recommendation to investors holding this stock(2 marks)

C.Sea Gardens is a resort company with average risk. The industry average Price-earnings ratio (P/E) for resort companies is 13. If Sea Gardens has earnings per share (EPS) of $1.70, what would be a fair price for its shares?(5 marks)

D.Lynns Investments Limited does not currently pay dividends. However, investors expect that in five (5) years, the firm will pay its first dividend of $3.50 per share and will continue to grow at 10% in perpetuity. If investors require a 15% annual return on the shares, what should be the current price of Lynns Investments Limited shares to investors?(12 marks)