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MGT201 Financial Management Assignment No 02 Solution & Discussion Due Date:10-01-2013

The Case:
Recently after graduating from Local Business College (LBC), you have started your
own investment consultancy firm – Prudent Consultants (PC’s) to earn your
livelihood. Mr. Zain, a regular investor approaches you to get some financial advice
on different intended stocks. On the basis of his preliminary research, Zain is curious
in reaping the risk and returns associated with these stocks. For your convenience,
he has also brought necessary information regarding these stocks along with him:
MAQ Motors’ possible returns on investment of Rs.10,000 in common stock,
over the coming year is as follows:
Economic conditions Probability ( p) Returns ( r) in Rupees
Recession 0.20 - 1, 000
Normal 0.60 1, 500
Boom 0.20 2, 500
Wahid Consultant Company, on its stock, is currently paying Rs. 2 per share
as dividend, which is expected to grow at a constant rate of 7 percent per year.
Zahoor Company’s stock Y is expected to pay a dividend of Rs. 57; while,
stock Z is expected to pay a dividend of Rs. 54 in the upcoming year. The
expected growth rate of dividends for both stocks is 7%.
Ideal Contractors’ common stock (a very long term investment) is also
available. Mr. Zain’s required return on this investment (based on risk) is 25%
(rCE). The present dividend offered by the Company is Rs 10; while, the par
value of each stock is Rs 100.
Based on provided information:
a) You need to calculate the expected return, standard deviation of returns and
coefficient of variations for MAQ Motors’ investment opportunity. [7 marks]
b) You are expected to analyze the price of Wahid Consultant Company’s stock
in case Mr. Zain requires a rate of return of 16 percent to invest in this stock
with this degree of riskiness. [4 marks]
c) You need to identify which stock of Zahoor Company has higher intrinsic
value; in case, Mr. Zain wishes to earn a return of 9% on each stock.
[5 marks]
d) You are supposed to determine the dividend yield pricing for common stock
of Ideal Contractors using both: ‘Zero Growth Pricing’ plus ‘Constant Growth
Pricing’ Models (where: g=10%) . Also compare & interpret the result. [4 marks]
(Show complete formulas, calculation and working as they carry marks)

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Replies to This Discussion

S Khokhar

main nay assignment nahi idea send kiya sab pagal hy yaha per kerna kah pori asssignmnet (idea) solved with calculation jaha per value galat hy wo question file sy sahi kerlain dakh ker and jaha per koi simple working missing means to say that (+,-,x and /) wali caculation missig ki hy.

thek.. main bhi kahon shayad meri assignment thek nhi hai.. thanks alot for reply..can u plz share ur final ans here or in private msg.. ?? 

Thks Friends

bhai file corrupt hy open nhi ho rhi.... again upload krain

Usman Attari 

for your and other convenience. get file from this link 

http://www.mediafire.com/view/?41cn4af95d9i2w5

aoa part 4 main 100 kiun gaib kr diya hy plz koi baty ga ?

par value = 100 ka koi effect nhi ho ga. ye sirf confuz krne k liye hy

Thks Asif DUDE..

Salam All,

Extended day , due dated has been extended to 11, kya ye theek hay, anyone reply please.

han jee thek ha 1 din extra hota assignment file ko pora parha karein.

zaroori nahi 1 din extra mily hamesha ok janab

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