Question 2 (20 marks) 3. An investor, Mr Matti, is trying to decide which of his two share investments he should close out. Mr. Matti is close to retirement but still needs to earn about 20% of his required pension in order to live comfortably throughout his retirement. Information about the two companies is shown below. Copper Production Ltd Mahangu Production Ltd Share price at the beginning of the year N$20 N$15. Share price at the end of the year N$26 N$18. Dividends received during the year N$5 N$2. Average Coefficient of variation over the last three years 0.480 0.251 Total number of shares owned by Mr Muffet 10 000 5 000

Required: (a) Calculate the return on investment per share for each of Mr Matti s investments

(b) Calculate the total return earned by Mr. Matti during the year for his entire shareholding of each company. Show the realized and unrealized portion of this total return. (6 (c) Explain how Mr Matti will use the coefficient of variation in his investment decision. Your answer should include a definition of the term coefficient of variation. (6 (d) What share investment do you recommend Mr Matti closes out (in other words sells to realise his gains)? Justify your answer with reasons.

Question 3 (25 marks) The directors of Koko Limited are considering opening a new factory to manufacture a new product at a cost of $3.0 million. During the last 5years, the company has had 3 million shares in issue. The current market price of these shares (at 31 December 20X8) is $1.45 ex-dividend. The company pays only one dividend each year (on 31 December) and dividends for the last five years have been as follows:

Year Dividend per share (cents)

20X8 14.1

20X7 14.1

20X6 12.1

20X5 11.6

20X4 11.0

Koko Limited currently has in issue $1 million 7% debentures redeemable on31 December 20Y2 at par. The current market price of these debentures is$83.60 ex-interest, and the interest is payable in one amount each year on 31 December. The company also has outstanding, a $500,000 bank loan repayable on 31 December 20Y7. The rate of interest on this loan is variable, being fixed at 3% above the bank's base rate which is currently 5%.

Required: (a)Calculate the weighted average cost of capital (WACC) for Koko Limited as at 31 December 20X8 (15 marks) (b)Explain the terms business risk and financial risk and the significance of each in using an existing WACC to appraise a future project. (7 marks) (c)Briefly advise the directors of Koko Limited on the suitability of using the WACC calculated in (a) above to discount the expected cash flows of the project (3 marks)

Question 4 (10 marks) You have extracted the following information from an online newspaper about Oshakati Ltd. For the years ended 2021and 2022. 2021 2022 Earnings per share 60c 80c Dividend per share 10c 10c Market Value per share 748c 1100c Net Asset Value 550c 600c

Calculate and comment on the following ratios: 1. Dividend cover (2 marks) 2. Earnings yield (2 marks) 3. Dividend yield (2 marks) 4. Price / Earnings ratio (2 marks) 5. Market / Book value (2 marks)