Which of the following

statements is most likely correct

regarding the P/E model?

Laduma Inc is a company

involved in producing and supplying organic coffee and coffee products to

retail food chain stores. You expect the demand for coffee and coffee products

to be above average for the next three years. You establish the following facts

and forecast.

     i.              

     ii.             

     iii.             

      iv.              

Calculate

the intrinsic value of Laduma Inc using the three-stage dividend discount

model.

Use

the following information to answer questions 7 and 8.

Karoo Limited is selling for R330. The beta of Karoo is 0.62 and current dividend is R7.45. The equity risk premium and the risk-free rate is 8.40% and 3% respectively. An analyst covering the share expects Karoo’s share to grow at 22% initially, declining linearly during a twelve-year period to a final and perpetual growth rate of 4%.

According

to the H-model valuation Karoo’s share is:

Use

the following information to answer questions 7 and 8.

Karoo Limited is selling for R330. The beta of Karoo is 0.62 and current

dividend is R7.45. The equity risk premium and the risk-free rate is 8.40% and 3%

respectively. An analyst covering the share expects Karoo’s share to grow at 22%

initially, declining linearly during a twelve-year period to a final and

perpetual growth rate of 4%.

Calculate

the value of Karoo’s dividend stream using the H-model.

Cape Ltd shares are currently

selling at R88. Cape Ltd recently paid a dividend of R1.50 per share; the risk-free

rate is 4%, the estimated beta 0.90 and the equity risk premium 10.20%.

Determine the constant dividend growth rate that Cape Ltd requires

to justify the market price.

Which one of the

following indicates the correct effect on the free cash flow to the firm (FCFF)

and FCFE for a change in the income and balance sheet items? Assume a R100

increase and a tax rate of 35%.

                                                                    Change in

FCFF            Change in FCFE

Use the following

information to answer questions 3 to 4.

Which of the following statements are most likely

correct? Based on CAPM, security 1 is …, while security 3 is ….

              Security 1                   Security 3

Use the following

information to answer questions 3 to 4.

Calculate the alpha of the

securities using the capital asset pricing model (CAPM).

Which one of the following

statements is most

likely correct regarding steps and activities/actions in the equity

valuation process?

Which of the following statements are most likely correct? The purpose of

the valuation model include …