Current Price

Current Price

1.

Current price

Current price = (divided paid (1 + divided growth)) / (return needed)

In our case therefore we get the current price using the above model

Current price = (2.20 (1 + 4%)) / (11%)

Current price = 20.8

Price in three years

The future value of these shares will be determined using the discount rate and the present value,

Future value = Present value X (1+ r) t

Current Price

Where r is the rate of interest or the discount rate and t is time in years

Future value = 20.8 X (1+ 0.11) 3

In three years the value will be 28.44672

Price in 15 years

Future value = 20.8 X (1+ 0.11) 15

In 15 years the price will be 99.51946

2.

Current price = (divided paid ( 1 + divided growth)) / (return needed)

47.0 = (1.90 ( 1 + 5.50)) / (return needed)

Return needed = 0.042649

Current Price

This means that the required return is 4.26%

3.

Dividend yield

Divided yield is calculated by dividing the recent divided paid by the current share price,

Therefore in our case the dividend yield is derived from 1.9 / 47.0 = 0.040426

Therefore divided yield is 4.043 %

Capital gains yield

The capital gain yield is calculated by getting the difference between the original price of the stock and the current or the selling price then dividing the difference by the original price

Capital gain yield = (C1 – C0) / ( C0)

Where C1 is the selling price and C0 is the original price

3 years

Current Price

For three years the capital gain yield will be:

= (28.44672 – 20.8)/ 20.8

0.367631

= 36.7631%

15 years

= (99.51946- 20.8)/ 20.8

3.784589

= 378.4589%

4.

Diamond Corporation

Current price = (divided paid ( 1 + divided growth)) / (return needed)

Current Price

Current price = (3.75 ( 1 + 5.5%)) / (12%)

Current price = 32.96875

Therefore the investor will be required to pay 32.96875

8. Gesto Inc

Current price = (divided paid) / (return needed)

84.12 = 5 / return needed

Required return = 0.059439

Therefore the required return is 5.94%

9.

Straight voting:

Current Price

In straight voting equal the shares present and therefore each director is elected separately, for this reason therefore there is a need to purchase at least half of the shares in order to win, for this reason therefore you may decide to purchase 150,001 shares, therefore this will cost you 9,450,063

Cumulative voting:

In cumulative voting we determine the number of shares needed as follows:

S = [(TN) / D+1)] + 1

Where S is the number of shares needed, T is the total number of shares, N is director’s number and D is the elected directors

S = 240001

The cost is 15,120,063

References:

Groppelli and E.Nikbakht (2006) Finance: introduction to finance, McGraw Hill publishers, New York