A shareholder in Malele PLC has just paid K50 per share for Malele PLC company stock. The stock will pay a dividend of K2 per share in the upcoming year. This dividend is expected to grow at annual rate of 10 percent for the indefinite future. The shareholder feels that the price she paid was an appropriate price, given her assessment of Malele PLC’s risks. What is the annual required rate of return of this shareholder?
What is the present value of the end of year cash flows of K2,000 per year, with the first cash flow received three years from today and the last on 22 years from today. Assume the discount rate of 8 percent.
Distinguish between systematic risk and unsystematic risk and then discuss the statement, “only market risk matters to a diversified investor”.