QUESTION $1$

Bonga currently has a portfolio of ordinary shares representing several different companies. Bonga

considers it to be a well$-$balanced investment portfolio, but he wants to reduce the overall risk of the

portfolio a bit more by including ordinary shares from Titan Mining Corporation.

The following information on Titan Mining Corporation is available:

For the period $2017$ to $2020,$ the company paid the following dividends per year respectively: R$3,14$;

$R3,55$; $R3,89$; and $R3,95.$ The $2021$ dividend is expected to increase by the average growth rate of the

dividends between $2017$ and $2020,$ and the dividend will increase by $10\%$ per year indefinitely from $2022$

onwards.

Bonga requires a return of $15\%$ on his investment portfolio and is not prepared to pay more than R$52,00$

per ordinary share of Titan Mining Corporation.

REQUIRED:

$1\mathrm{.}1$ Calculate the current price of Titan Mining Corporation's ordinary share.

$(8$ marks$)$

$1\mathrm{.}2$ Should Bonga purchase Titan Mining Corporation shares to include in his investment portfolio?

Provide reasons for your answer.

$(2$ marks$)$