MathMaster logo

MathMaster

  1. Home
  2. general
  3. bonga currently has a portfolio of ordinary shares representing several different companies bonga considers it to be a wel
Question

Bonga currently has a portfolio of ordinary shares representing several different companies. Bonga considers it to be a well-balanced investment portfolio, but he wants to reduce the overall risk of the portfolio a bit more by including ordinary shares from Titan Mining Corporation. The following information on Titan Mining Corporation is available: For the period 2017 to 2020, the company paid the following dividends per year respectively: R3,14; R3,55; R3,89; and R3,95. The 2021 dividend is expected to increase by the average growth rate of the dividends between 2017 and 2020, and the dividend will increase by 10% per year indefinitely from 2022 onwards. Bonga requires a return of 15% on his investment portfolio and is not prepared to pay more than R52,00 per ordinary share of Titan Mining Corporation.Calculate the current price of Titan Mining Corporation’s ordinary share.

238

likes
1188 views

Answer to a math question Bonga currently has a portfolio of ordinary shares representing several different companies. Bonga considers it to be a well-balanced investment portfolio, but he wants to reduce the overall risk of the portfolio a bit more by including ordinary shares from Titan Mining Corporation. The following information on Titan Mining Corporation is available: For the period 2017 to 2020, the company paid the following dividends per year respectively: R3,14; R3,55; R3,89; and R3,95. The 2021 dividend is expected to increase by the average growth rate of the dividends between 2017 and 2020, and the dividend will increase by 10% per year indefinitely from 2022 onwards. Bonga requires a return of 15% on his investment portfolio and is not prepared to pay more than R52,00 per ordinary share of Titan Mining Corporation.Calculate the current price of Titan Mining Corporation’s ordinary share.

Expert avatar
Seamus
4.9
98 Answers
"To calculate the current price of Titan Mining Corporation's ordinary share, we can use the Dividend Discount Model (DDM), which is particularly useful for companies that pay dividends regularly. The formula for the price of a stock in this model is:

P = \frac{D_1}{r - g}

where:
- P is the current price of the stock.
- D_1 is the expected dividend next year.
- r is the required rate of return.
- g is the expected growth rate of dividends.

### Step 1: Calculate the Average Growth Rate from 2017 to 2020

The growth rates for each year are as follows:
- From 2017 to 2018: 13.06%
- From 2018 to 2019: 9.58%
- From 2019 to 2020: 1.54%

The average annual growth rate over the period from 2017 to 2020 is approximately 8.06%.

### Step 2: Calculate D_1 for 2021

Given the average growth rate obtained in Step 1, the dividend for 2021 ( D_1 ) is calculated using:
D_1 = \text{Dividend}_{2020} \times (1 + \text{average growth rate})

### Step 3: Calculate the Price of the Stock Using DDM

Using a required return r = 0.15 (15%) and a growth rate g = 0.10 (10%) from 2022 onwards, the price of the stock is calculated as:
P = \frac{D_1}{0.15 - 0.10}

### Calculation Details

- Dividend for 2021 ( D_1 ): R4.27
- Price of the Stock Using DDM: Approximately R85.37

\boxed{Current \ price = R85.37}"

Frequently asked questions (FAQs)
What is the derivative of sin(3x) + 2cos(4x) - tan(2x) with respect to x?
+
Question: If log(base b) x = a, what is x in terms of b and a?
+
Convert 3.14 radians to degrees.
+
New questions in Mathematics
A=m/2-t isolate t
1 + 1
-x+3x-2,si x=3
Pedro bought 9 kg of sugar at the price of R$1.80 per kilogram, six packets of coffee at the price of R$3.90 per packet and 8 kg of rice at the price of R$2.70 per kilogram. Knowing that he paid for the purchases with a R$100.00 bill, how much change did he receive?
(m²-121)
1 plus 1
2x-4y=-6; -4y+4y=-8
(-5/6)-(-5/4)
2x+4x=
Scores are normally distributed with a mean of 25 and standard deviation of 5. Find the probability that sixteen randomly selected students have a mean score that is less than 24.
The two sides of the triangle are 12 cm and 5 cm, and the angle between the sides is 60°. Cover the area of ​​the triangle!
Twenty‐five students in a class take a test for which the average grade is 75. Then a twenty‐sixth student enters the class, takes the same test, and scores 70. The test average grade calculated with 26 students will
What is the value of f(-3) for the function X squared+5x-8=
We plan to test whether the mean mRNA expression level differs between two strains of yeast, for each of 8,000 genes. We will measure the expression levels of each gene, in n samples of strain 1 and m samples of strain 2. We plan to compute a P-value for each gene, using an unpaired two-sample t-test for each gene (the particular type of test does not matter). a) What are the null hypotheses in these tests (in words)? [2] b) If, in fact, the two strains are identical, how many of these tests do we expect to produce a P-value exceeding 1/4? [2]
When taking a test with m closed answers, a student knows the correct answer with probability p, otherwise he chooses one of the possible answers at random. What is the probability that the student knows the correct answer given that he answered the question correctly.
Log0
00 piece jigsaw puzzle. the completed puzzle is 10x10. each piech connects to at least 2 other pieces. i plan to assemble by taking pieces out of box one by one. if i've already taken out 2 pieces that dont directly connect, what is the minimum number of additional pieces that i need to draw to in order to guarentee that the original 2 pieces connect?
7- A printing company found in its investigations that there were an average of 6 errors in 150-page prints. Based on this information, what is the probability of there being 48 errors in a 1200-page job?
did an analysis of dropout from the nursing faculty at the Universidad Veracruzana. With a poblation of 122 students, it turned out that according to the gender data, the female sex predominates with 82%, and the male sex male is found with 12%. The main factors why students drop out are, first of all, "Not "re-enrolled" at 49%, second place "Personal reasons" at 20%, third place "change of school" in 11%, "lack of documents" and "economic reasons" in 7%, change of residence and lack of social service in 3%. Of this sample, how many students dropped out for other reasons?
Arturo had hospitalization expenses of $8,300. Your policy for medical expenses Seniors have a deductible of $500 and expenses are paid at a 20% coinsurance. These are the first expenses ever this year, how much will Arturo have to pay in your bill for hospitalization expenses?

You might be interested in