QUESTION 1 (5 Marks )

You have been given the following limited amount of information about the small company Creative 360 Ltd. Creative 360 Ltd information

Profit before taxation 470,000 Taxation 66,000

Total number of ordinary shares in issue 260,000 Total number of Preference shares in issue 1500

Dividend payment 75,000 Current market share price 125p

Use this information to calculate the following; a) Dividend yield (2 marks) b) Earnings per share (2 marks) c) Would it be reasonable to say that potential investors should only consider Companies with a sound history of dividend payments and a high dividend yield?

QUESTION 2 ( 5 Marks )

a) Calculate the weighted alpha of the portfolio detailed below. You may assume all share prices are ex dividend. (3 marks)

Company Share Price (p) Number of shares held Beta A 650 25,000 1.5 B 325 30,000 1.1 C 540 50,000 0.4 D 98 45,000 2.1 E 117 14,000 1.0

b) Explain the significance of the portfolio Alpha (2 Marks)