Determine the value of a share in def ltd

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Nana has never invested in shares before, therefore she has come to you as a prospective finance graduate for some advice. In your conversations with Nana you have determined her Required Rate of Return (RRR) to be 9.75%.

Problem a) Determine the value of a share in DEF Ltd. if they paid a dividend of $1.45 this year and the dividend is expected to grow by 3% indefinitely. Show formula, variables, calculation and a concluding statement in your response.

Problem b) Determine the value of a share in GHI Ltd. if in the current year they paid a dividend of $3.50 and this is expected to not change into the foreseeable future. Show formula, variables, calculation and a concluding statement in your response.

Problem c) If the market price for each share in parts a) and b) is $30 per share, should Nana buy either or both shares? Justify your answer.

Problem d) List and describe two differences between shares and bonds.

Reference no: EM133000670

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