Air University

Subject: Financial Management Total Marks: 10

Semester/Section: MBA-2 Time Allowed: 30mins
Instructor: Dr. Hasan Hanif
1. Manage you time according to the marks allotted to the respective questions.
2. The marks for each part are written in parentheses.
3. Do NOT use mobile as calculators during exams.

Question

Abbot Textile Manufacturing is considering a cash purchase of the stock of Thal Tools.
During the year just completed, Thal earned $4.25 per share and paid cash dividends of $-----
per share . Thal’ earnings and dividends are expected to grow at 25% per year for the next 3
years, after which they are expected to grow at 10% per year to infinity. What is the
maximum price per share that Abbot should pay for Thal if it has a required return of 15% on
investments with risk characteristics similar to those of Thal? (10 marks)

Note
Students, use the values written against your name as dividend paid by Thal.

Zawar 3
Akash 4
Ahmed 5
Asma 6
Saba 6.5
Ayesha 7
Dilawaiz 8
Shehreen 9
Mahnoor 2