Q6. Sunflower Limited's initial dividend growth is 30%; it will decline linearly during an 18-year period to a final and perpetual growth rate of 4.50%. The estimated required rate of return on equity is 9.60%. Calculate the value of Sunflower Limited, if the current earnings are $2.00 and its retention ratio is 20%.

1. $26.20

2. $104.78

3. $130.98

Q7. Rusere Limited pays an annual dividend of $3 and expects to continue paying this dividend with no future growth in dividends forever. The required rate of return is 5.30%. Calculate the intrinsic value of Rusere Limited.

1. $50.00

2. $56.60

3. $60.00

Q8. Koffe Inc is a company involved in producing and supplying organic coffee and coffee products to retail food chain stores. You expect the demand for coffee and coffee products to be above average for the next three years. You establish the following facts and forecast:

i. Current earnings per share $4.

ii. Koffe Inc pays 35% of its earnings as dividends.

iii. You anticipate that Koffe Inc will grow at 15 % for three years, 10% for two years and 5% thereafter.

iv. The required rate of return is 10%.

Calculate the intrinsic value of Koffe Inc using the three-stage dividend discount model.

1. $41.39

2. $68.29

3. $81.40

Q9. Select the most correct effect on the FCFF and FCFE for a change in the income and balance sheet items. Assume a R100 increase and a tax rate of 30%.