Krishna from Mombasa has never invested in shares before. She has come to you as a prospective finance graduate, for some advice. In your conversations with Krishna, you have determined her Required Rate of Return (RRR) to be 5.50%.

a)Determine the value of a share in BBB Ltd. if they paid a dividend of $0.5 this year and the dividend is expected to grow by 2% indefinitely.

Showformula,variables,calculation,and aconcluding statementin your response.

b)Determine the value of a share in CCC Ltd. if in the current year they paid a dividend of $0.6 and this is expected to not change into the foreseeable future.

Showformula,variables,calculation,and aconcluding statementin your response.

c)If the market price for each share in parts a) and b) is $10 per share, should Krishni buyeitherorbothshares? Justify your answer.

d)Krishnidecided to buy 200 000 shares in DDD Ltd., giving her 2% ownership in the company (DDD Ltd. currently has 10 000 000 issued shares). One year later, DDD Ltd. announces aprivate placement of a further 10 000 000 shares, in order to raise funds for their new venture: Project Rare Earths.

(i)Describe two features of a private placement of shares.

(ii)What is the major disadvantage to Krishni of the above private placement? Include in your answer the effect on her ownership.

(iii)Identify one other source of equity funding Krishni, as a shareholder, would prefer. Justify your choice.

e)Krishna's friend, Armaan from Nairobi, is a 23-year-old with no debt to his name. He is frustrated by the change in the interest he receives from savings. Under Krishna's recommendation, Armaan, an essential worker at Woolworths under manager Dean, came to you for investment advice. Explain the recommendations you would make to Armaan by using what you have learned in MAF101.