Divesh

PGP/24/387

FMI Assignment-9

Q2. C- Dividend Yield

Q12. E – Return of retained earnings * Retention ratio

Q22. D – Was conducted in the primary market

Q32. C- $27.91

R = 11.6%

G = 3%

DIV =$2.4

Po = DIV / (r – g)

Po = 2.4 /(0.116 – 0.03)

Po = $27.906

Q42. D - $4.66

Po = $58.25

R=12%

G=4%

Po = DIV / (r – g)

58.25 = DIV / (0.12 – 0.04)

DIV = $4.66

Q52. D - $7.61

DIV Y1 = $0.35

DIV Y2 = $0.5

DIV Y3=$0.8

R = 13.45%

PV = DIV1 / (1 + r) + DIV2 / (1 + r) ^2 + DIV3 / (1 + r) ^3

= 0.35 / (1.1345) + 0.5 / (1.1345) ^2 + 0.8/ (1.1345) ^3

= $1.244

After this, Dividend = $1.25 for indefinite period

PV at year 3 = DIV / r
 Divesh
PGP/24/387

= 1.25 / 0.1345

= 9.293

PV at year 0 = 9.293 / (1.1345) ^3

= 6.364

Total worth = 1.244 + 6.364

= $7.609

Q62. B - $6.79

DIV 1 = 0.9 * 1.8 = 1.62 (10% reduction for 2 years)

DIV 2 = 0.9 * 1.62 = 1.458

R= 13%

PV = DIV1 / (1 + r) + DIV2 / (1 + r) ^2

= 1.62 / (1.13) + 1.458 / (1.13) ^2

= 2.575

After that $0.7 constant dividend will be given

PV at 2nd year = DIV / g

= 0.7 / 0.13

= 5.384

PV today = 5.384 / (1.13) ^2

= 4.216

Total worth = 2.575 + 4.216

= 6.791

Q72. E -14.4%

Net Income = $5,200

Assets = $56,400

Equity = $21,600

DIV Payout Ratio = 40%

Return on Equity = Net Income / Total Equity

= 5200/21600

= 0.240
 Divesh
PGP/24/387

DIV Growth Rate = 0.240 * 0.6

= 0.144

Q82.

Market Order – It is the most basic type of order in which the stocks are sold or bought at the
current market price.

Limit Order – In this, the stocks are bought and sold at a predefined price by the seller or buyer.

For eg- A investor wants to buy a particular stock at a price of $30 or less, then he can set this price
and his order wont be processed until the stock price comes in this range i.e. less than or equal to
$30.

Stop Order – It gets activated when the future price meet the conditions specified by the investor.

For eg- If a investor has specified that sell a particular stock at $29 if its price falls below $30, then
the order gets activated when the price falls below it.