BAFI1042: Investment - Alexis Leong Case Study - Business Assignment Help

Assignment Task:

QUESTION 1

1. Alexis Leong has just bought ordinary shares of Kemuncak Airlines Pte. The company expects to grow at the following rates for the next 3 years: 10 per cent, 13 per cent, and 5 per cent. Last year the company paid a dividend of $3.00 per share on earnings of $9.20 per share. Assuming a required rate of return of 8.1 per cent, calculate the expected dividends for the next 3 years and also the total present value of these dividends.

2. Rangup Noodles Pte has been selling all types of noodles for the past 20 years. The company’s product line has seen very little change in the past 5 years, and the company does not expect to add any new items for the foreseeable future. Last year, the company paid a dividend of $1.00 per share to its ordinary shareholders. The company is not expected to increase its earnings for the next several years. If your required rate of return for such companies is 3.45 per cent, what is the current value of shares in Rangup Noodles?

3. What does it mean when a company has a very high P/E ratio? Give examples of industries in which you believe high P/E ratios are justified.

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