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ASSIGNMENT ON SHARE VALUATION PART 1 Question 1 PART 1 An investor, Bill, has decided to invest on the stock market. He contacted a stockbroker, Tom, who recommended to buy shares of a company called Lotus Ltd. Since the investor is a financial planner and he has an in-depth knowledge of share valuation. So he decided to collect information on the stock in order to analyze it. The information is provided in the table A below. Table A $3.20 Year 2019 Current Dividend Cost of capital (1) Index in the beginning of the stock market [Jan 1] Current index of the stock market Government bond rate of the country Market Risk Dividend growth [3] Dividend paid Net income Total Equity 13567 15100 0.052 1.75 $ 87,560 $150,365 $1,005,000 Additional information to calculate g: Step Find dividend payout. Div Payout = Div paid / Net income Step 2 Find b which is (1- Div payout) Step 3 Find ROE [ check your project on Ratios to know how to calculate ROE] Step 4 Find g g=ROE xb Required 1. Find cost of capital. 2. Find D1 3. Find g 4. Calculate the intrinsic value of the share of Lotus Ltd 5. If the share is selling at $39.00, would the investor accept the advice of Tom, the stockbroker? PART 2 A. Compare the primary market and the secondary market of a stock market. B. Why is secondary market important for a company C. What is a listed company? Search two features of a listed company D. Compare a share with a bond. How a share does almost the same function as a bond