9 Turtle Products Ltd is expected to grow at a constant rate of 8 percent per an

Question

9 Turtle Products Ltd is expected to grow at a constant rate of 8 percent per annum If the company's next dividend is $5 50 and its current price is $55 00, the required annual rate of return on this share is closest to: A. 10.0% B. 16,5% C. 18.0% D. 8.0% 10. How much should be deposited into a fund on 1 January 2016 if 9 annual withdrawals of $10,000 are to be made from the fund? The first withdrawal is on 1 January 2017 . Interest is at 5% pa effective (EAR). A. $110,265.64 B. $94,500.00 C. $75,656.32 D. $71,078.22

Explanation / Answer

9) C. 18.0% Working; Required annual rate = (D1/P0)+g Where, = (5.50/55.00)+0.08 D1 $       5.50 = 18.0% P0 $    55.00 g 8% 10) D. $ 71,078.22 Working: a. Present Value of annuity of 1 = (1-(1+i)^-n)/i Where, = (1-(1+0.05)^-9)/0.05 i 5% =      7.1078 n 9 b. Present value of annual withdrawl = Annual Withdrawl x Present Value of annuity of 1 = $ 10,000.00 x      7.1078 = $ 71,078.22

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