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Question 2 A shareholder of Company is concerned about the recent performance of the company. She has collected the following financial information Yearta 31 December 2019 2020 2021 Revenue in m 94 9.6 10,2 Earnings per share in pence 62-3 674 594 Oividend per share in pence 34.6 35.6 374 Closing dividend share price in 72 7.9 6,6 CAPM Expected returns 10 12 9 The finance director of Company B proposes that it will pay no dividend in 2022, 2073 and 2024. The company will pay a dividend per share of 62 pence in 2025. it will then grow at 4% per year in 2026 and beyond. The expected cost of equity of Company B 10% per year for 2027 and onward. Dividend in peld at the end of each war Required (a) Calculate the dividend yield, capital gain and the total shareholder return for 2020 and 2021. Explain why they are different from the expected return using the CAPM (10 marks (b) {c] ( We define the predictive P/E s price at the beginning of the year divided by the earnings for the year. Calculate the average predictive P/E. 13 marks Suppose that we expect the earnings per share for 2022 is 60 pence. What is the expected share price based on the average predictive P/E? 12 mark Using the observed growth rate on OPS, determine the expected share price for Company Bon 31 December 2021. (4 marks Using the new dividend policy proposed by the finance director, determine the expected share price for Company Bon 31 December 2021. (8 marks) Explain why the observed share price for Company B at the end of 2021 (660 pence) differs from the share price you calculate in (bio, Ichand (c) (no more than 500 words) 113 marks) Total 40 marks d) Question 2 A shareholder of Company is concerned about the recent performance of the company. She Mas collected the following financial information Year to 31 December 2019 2020 2003 Revenue in m 9.4 945 102 Earnings per share in pence 623 574 59.4 Dividend por share in pence 34.6 35.5 374 Glosing dividend share price 7.2 7.9 CAPM Expected return 10 12 9 The finance director of Company proposes that it will pay no dividend in 2022 2023 and 2024. The company will pay a dividend per share of 62 pence in 2025. It will then grow at 4% per year in 2026 and beyond. The wpected cost of equity of Company B : 10% per year for 2022 and onward Dividend is paid at the end of each year Required Calculate the dividend yield capital pain and the total shareholder return for 2020 and 2021 plain why they are different from the expected retum using the CAPM 10 mars) thi We define the predictive P/E s price at the beginning of the year divided by the warnings for the year. Calculate the werage predictive 09 suppose that we expect the samnings per share for 2022 is 60 pence. What is the expected share price based on the were predictive 7/? 12 mars el Ung the observed growth rate on DPS, determine the expected share price for Company Bon 31 December 2021 Using the new dividend pole proposed by the finance director, determine the expected share price for Company on 31 December 2021 18 maria) Id Explain why the observed share price for company at the end of 2021 (660 pence) differs from the share price you calculate (il and one more than 500 word) 113 mars Tata Question 2 A shareholder of Company concerned about the recent performance of the company. She has collected the following financial Information fart 31 December 2010 2020 2021 Revenue in cm 10.2 Earnings per share in 23 574 59.4 Dividend per share in pence 346 35.6 27.4 Closing dividend share price in E 22 7.9 66 CAPM pected return 10 96 The finance director of Company proposes that it will pay no dividend in 2022 2023 and 2024. The company will pay a didend per share of 62 pence in 2025. It will then grow at 4% per year in 2020 and beyond The expected cost of equity of Company is 10% per year for 2022 and onward. Dividend is paid at the end of each year Required Calculate the dividend yield, capital pain and the total shareholder return for 2020 and 2021. Explain why they are different from the expected return using the CAPM. (30 mario) d) We define the predictive P/E as price at the beginning of the year divided by the earnings for the year. Calculate the average predictive P/E 13 marks (1) Suppose that we expect the earnings per share for 2022 is 60 pence. What is the expected share price based on the were predictive P/E? (2 marki c) Using the observed growth rate on DP, determine the expected share price for Company Ban 31 December 2021. 14 mars Using the new dividend policy proposed by the finance director, determine the expected share price for Company Bon 31 December 2021 (8 marks) Explain why the observed share price for Company B at the end of 2021 (660 pence) differs from the share price you calculate in bil. (cl) and (cil. (no more than 500 words) 113 marks) Tomas Question 2 A shareholder of Company is concerned about the recent performance of the company. She has collected the following financial information Yearta 31 December 2019 2020 2021 Revenue in m 94 9.6 10,2 Earnings per share in pence 62-3 674 594 Oividend per share in pence 34.6 35.6 374 Closing dividend share price in 72 7.9 6,6 CAPM Expected returns 10 12 9 The finance director of Company B proposes that it will pay no dividend in 2022, 2073 and 2024. The company will pay a dividend per share of 62 pence in 2025. it will then grow at 4% per year in 2026 and beyond. The expected cost of equity of Company B 10% per year for 2027 and onward. Dividend in peld at the end of each war Required (a) Calculate the dividend yield, capital gain and the total shareholder return for 2020 and 2021. Explain why they are different from the expected return using the CAPM (10 marks (b) {c] ( We define the predictive P/E s price at the beginning of the year divided by the earnings for the year. Calculate the average predictive P/E. 13 marks Suppose that we expect the earnings per share for 2022 is 60 pence. What is the expected share price based on the average predictive P/E? 12 mark Using the observed growth rate on OPS, determine the expected share price for Company Bon 31 December 2021. (4 marks Using the new dividend policy proposed by the finance director, determine the expected share price for Company Bon 31 December 2021. (8 marks) Explain why the observed share price for Company B at the end of 2021 (660 pence) differs from the share price you calculate in (bio, Ichand (c) (no more than 500 words) 113 marks) Total 40 marks d) Question 2 A shareholder of Company is concerned about the recent performance of the company. She Mas collected the following financial information Year to 31 December 2019 2020 2003 Revenue in m 9.4 945 102 Earnings per share in pence 623 574 59.4 Dividend por share in pence 34.6 35.5 374 Glosing dividend share price 7.2 7.9 CAPM Expected return 10 12 9 The finance director of Company proposes that it will pay no dividend in 2022 2023 and 2024. The company will pay a dividend per share of 62 pence in 2025. It will then grow at 4% per year in 2026 and beyond. The wpected cost of equity of Company B : 10% per year for 2022 and onward Dividend is paid at the end of each year Required Calculate the dividend yield capital pain and the total shareholder return for 2020 and 2021 plain why they are different from the expected retum using the CAPM 10 mars) thi We define the predictive P/E s price at the beginning of the year divided by the warnings for the year. Calculate the werage predictive 09 suppose that we expect the samnings per share for 2022 is 60 pence. What is the expected share price based on the were predictive 7/? 12 mars el Ung the observed growth rate on DPS, determine the expected share price for Company Bon 31 December 2021 Using the new dividend pole proposed by the finance director, determine the expected share price for Company on 31 December 2021 18 maria) Id Explain why the observed share price for company at the end of 2021 (660 pence) differs from the share price you calculate (il and one more than 500 word) 113 mars Tata Question 2 A shareholder of Company concerned about the recent performance of the company. She has collected the following financial Information fart 31 December 2010 2020 2021 Revenue in cm 10.2 Earnings per share in 23 574 59.4 Dividend per share in pence 346 35.6 27.4 Closing dividend share price in E 22 7.9 66 CAPM pected return 10 96 The finance director of Company proposes that it will pay no dividend in 2022 2023 and 2024. The company will pay a didend per share of 62 pence in 2025. It will then grow at 4% per year in 2020 and beyond The expected cost of equity of Company is 10% per year for 2022 and onward. Dividend is paid at the end of each year Required Calculate the dividend yield, capital pain and the total shareholder return for 2020 and 2021. Explain why they are different from the expected return using the CAPM. (30 mario) d) We define the predictive P/E as price at the beginning of the year divided by the earnings for the year. Calculate the average predictive P/E 13 marks (1) Suppose that we expect the earnings per share for 2022 is 60 pence. What is the expected share price based on the were predictive P/E? (2 marki c) Using the observed growth rate on DP, determine the expected share price for Company Ban 31 December 2021. 14 mars Using the new dividend policy proposed by the finance director, determine the expected share price for Company Bon 31 December 2021 (8 marks) Explain why the observed share price for Company B at the end of 2021 (660 pence) differs from the share price you calculate in bil. (cl) and (cil. (no more than 500 words) 113 marks) Tomas