QUESTION `5 (2 + 5 = 7 marks)
Altron Technology is expecting a conclusion of lofty augmentation and has firm to lessen its annual dividend by 10% a year for the next three years. After that, it allure extension the annual dividend by 6% per year for two years, followed by 7% per year for another two years and then it expects to guard a continuous augmentation of 5% per year.
Altron recently remunerated $1.80 dividend per divide and investors insist-upon 13% reappear.
a. Draw a space succession showing the expected dividends of Altron.
b. Calculate the appraise of Altron’s divide.
QUESTION 6 (12 marks)
Salt Succession Co needs a local equipment for their desalination purpose and it has current two pleads.
Under chief plead the primal manufacturing consumes are $100,000, which allure be followed by servicing consumes of $3,000 a year at the end of each of the next three years. At the end of third year Salt Succession allure keep to re-establish the equipment.
Under assist plead, the primal manufacturing consumes are $90,000, which allure be followed by servicing consumes of $8,000 a year at the end of Year 1, $9,000 at the end of Year 2, and $10,000 at the end of each of Years 3 and 4. At the end of fourth year Salt Succession allure keep to re-establish the equipment.
The abatement blame is 9%. Ignore depreciation and taxes. Calculate the annual equipollent consume (AEC) of each and decipher which plead Salt Succession should sanction.