MAC3702 TL202 S2 2014
MAC3702/202/2/2014
Tutorial letter 202/2/2014
Application of financial management techniques SEMESTER 2
Department of Management Accounting
IMPORTANT INFORMATION:
This tutorial letter contains important information about your module.
Dear Student
Enclosed please find the solution in respect of assignment 02/2014. It is in your own interest to work through the suggested solution in conjunction with the assignment and your own answer.
Kind regards
Telephone number
Room number
Mr N Masela
012 429 4415
1 – 37
Mrs S Büchner
012 429 2266
1 – 57
Mrs S Klopper
012 429 8526
1 – 40
E-mail
MAC3702-14-S2@unisa.ac.za
MAC3702/202/2
SOLUTION FOR ASSIGNMENT 02/2014 FOR THE SECOND SEMESTER
QUESTION 1
(a)
Determining value of company using the fair rate of return provided
YEAR
2014
2015
2016
2017
(P0)
(P1)
(P2)
(P3)
(P4)
Rand
Rand
Rand
Rand
Rand
Expected dividend to be paid
2014
550 000 x 1,10
2015
605 000 x 1,15
2016
695 750 x 1,20
2017
834 900 x 1,25
605 000
695 750
834 900
1 043 625
Gordon's dividend growth model
2018 and onward
43 484 375
0
Fair rate return Net value 605 000
695 750
834 900
44 528 000
0,781
0,610
0,477
0,373
472 505
424 408
398 247
16 608 944
of
28,00%
present
17 904 104
0
Calculation
=
=
ke -g x -
=
= R43 484 375
2
MAC3702/202/2
QUESTION 1 (continued)
The value of 100% of Kgorong (Pty) Ltd is R17 904 104
Therefore the value of 10%
= R17 904 104 x 0,10
= R1 790 410
Alternative method by making use of the calculator
INPUT in calculator
R0
R605 000
R695 750
R834 900
R44 528 000
I/YR
28
COMP NPV (HP10bII)
R17 883 392
The value of 100% of Kgorong (Pty) Ltd is R17 883 392
Therefore the value of 10%
= R17 883 392 x 0,10
= R1 788 339
(b)
More reliable results will be obtained when the following conditions are met:
The business enterprise is a going concern
The source of the value to the shareholder is essentially only the future stream of dividends
The dividends are expected
Tutorial letter 202/2/2014
Application of financial management techniques SEMESTER 2
Department of Management Accounting
IMPORTANT INFORMATION:
This tutorial letter contains important information about your module.
Dear Student
Enclosed please find the solution in respect of assignment 02/2014. It is in your own interest to work through the suggested solution in conjunction with the assignment and your own answer.
Kind regards
Telephone number
Room number
Mr N Masela
012 429 4415
1 – 37
Mrs S Büchner
012 429 2266
1 – 57
Mrs S Klopper
012 429 8526
1 – 40
MAC3702-14-S2@unisa.ac.za
MAC3702/202/2
SOLUTION FOR ASSIGNMENT 02/2014 FOR THE SECOND SEMESTER
QUESTION 1
(a)
Determining value of company using the fair rate of return provided
YEAR
2014
2015
2016
2017
(P0)
(P1)
(P2)
(P3)
(P4)
Rand
Rand
Rand
Rand
Rand
Expected dividend to be paid
2014
550 000 x 1,10
2015
605 000 x 1,15
2016
695 750 x 1,20
2017
834 900 x 1,25
605 000
695 750
834 900
1 043 625
Gordon's dividend growth model
2018 and onward
43 484 375
0
Fair rate return Net value 605 000
695 750
834 900
44 528 000
0,781
0,610
0,477
0,373
472 505
424 408
398 247
16 608 944
of
28,00%
present
17 904 104
0
Calculation
=
=
ke -g x -
=
= R43 484 375
2
MAC3702/202/2
QUESTION 1 (continued)
The value of 100% of Kgorong (Pty) Ltd is R17 904 104
Therefore the value of 10%
= R17 904 104 x 0,10
= R1 790 410
Alternative method by making use of the calculator
INPUT in calculator
R0
R605 000
R695 750
R834 900
R44 528 000
I/YR
28
COMP NPV (HP10bII)
R17 883 392
The value of 100% of Kgorong (Pty) Ltd is R17 883 392
Therefore the value of 10%
= R17 883 392 x 0,10
= R1 788 339
(b)
More reliable results will be obtained when the following conditions are met:
The business enterprise is a going concern
The source of the value to the shareholder is essentially only the future stream of dividends
The dividends are expected