Question
Q1. Mr Phuduhudu has been monitoring MMN Ltd for the past year for possible investment opportunities in the company. The company had an EPS of
Q1. Mr Phuduhudu has been monitoring MMN Ltd for the past year for possible investment opportunities in the company. The company had an EPS of $5 as ta the end of 2022., a dividend payout ratio of 30% and a returned earnings of 20%. If the discount rate is 20%, calculate;
i) Dividends at year end (2 marks)
ii) Growth rate in dividends (3 marks)
iii) The price of share of MMN Ltd ( 3 marks)
b) It is often argued that a company's beta is stable and can be estimated by looking at the whole industry as a proxy. Studies have however shown that betas can be influenced by company- specific factors. Discuss in details the 3 determinants of beta that will influence a firm's beta to change over time. (12marks)
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