QUESTION TWO

2.1 Discuss the impact of a firms dividend payout policy and whether it has an influence on share price? (6 marks

2.2 Explain why the different sources of capital have different levels of risk and return. (6 marks)

2.3 Discuss whether the dividend growth model or the capital asset pricing model should be used to calculate the cost of equity. (6 marks)

2.4 Using the dividend growth model, an analyst has estimated that her companys cost of equity capital is 12% per annum. The current ex-dividend share price is R232.4, and the current dividend is 11 cents per share.

Do calculations to show what rate of dividend growth the analyst is assuming.