share price – Knowsia

FM – L2 – Q19 – Financial markets

Effect of NPV announcement on share price in a weak form efficient market.

Question

A company’s board of directors makes a decision on 1st May to invest in a new project that will have an NPV of + GH₵4,000,000. The decision is announced to the stock market on 12th May.

The company has 50 million shares in issue and at close of trading on 30th April these had a market value of GH₵4 each.

Required:

(A). State what would happen to the share price of the company if the stock market has weak form efficiency

(B) State what would happen to the share price of the company if the stock market has semi-strong form efficiency.

(C). State what would happen to the share price of the company if the stock market has strong-form efficiency.

Answer

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Tags: Efficient markets, NPV announcement, share price, Stock market, Strong form efficiency
Level: Level 2

Topic: Financial markets

FM – L2 – Q14 – Business valuations

Calculate expected share price using dividend valuation model with constant dividends of GH₵0.24 in perpetuity.

Question

Kofi Enterprises has shareholders expecting an 8% annual return. The company paid dividends of GH₵0.24 per share in the year just ended.

Required:

(A). Assume that Kofi Enterprises pays out all of its annual profits as dividends, and the annual dividend per share is expected to be GH₵0.24 in perpetuity. Using the dividend valuation model, suggest what the expected share price of the company should be.

(B). Assume that the expected annual rate of growth in dividends is expected to be 3%. Using the dividend growth valuation model, suggest what the expected share price of the company should be.

(C). Assume that Kofi Enterprises is expected to retain 60% of its profits and reinvest the money to earn an annual return of 9%. Using the dividend growth valuation model (the Gordon growth model), suggest what the expected share price of the company should be.

Answer

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Tags: Business valuations, dividend valuation, Perpetuity, share price
Level: Level 2

Topic: Business valuations

FM – L2 – Q13 – Portfolio theory and CAPM

Calculate the expected return on shares with a beta of 1.2, given risk-free rate of 15% and market return of 20%.

Question

Unity Ventures have shares in a company which paid a dividend of GH¢10 to its shareholders. The shares have a beta factor of 1.2. The risk-free rate of return and the market return are 15% and 20% respectively.

Required:

(a) Calculate the return on the shares.

(b) Calculate the value of the shares.

Answer

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Tags: dividend valuation, expected return, share price
Level: Level 2

Topic: Business valuations

Tag (SQ): share price

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FM – L2 – Q19 – Financial markets

Effect of NPV announcement on share price in a weak form efficient market.

FM – L2 – Q14 – Business valuations

Calculate expected share price using dividend valuation model with constant dividends of GH₵0.24 in perpetuity.

FM – L2 – Q13 – Portfolio theory and CAPM

Calculate the expected return on shares with a beta of 1.2, given risk-free rate of 15% and market return of 20%.

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Tag (SQ): share price

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FM – L2 – Q19 – Financial markets

Effect of NPV announcement on share price in a weak form efficient market.

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FM – L2 – Q14 – Business valuations

Calculate expected share price using dividend valuation model with constant dividends of GH₵0.24 in perpetuity.

You're reporting an error for "FM – L2 – Q14 – Business valuations"

FM – L2 – Q13 – Portfolio theory and CAPM

Calculate the expected return on shares with a beta of 1.2, given risk-free rate of 15% and market return of 20%.

You're reporting an error for "FM – L2 – Q13 – Portfolio theory and CAPM"

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