UNIVERSITY OF THE SOUTHERN CARIBBEAN
FNCE217 PRINCIPLES OF FINANCE
STOCK VALUATION ASSIGNMENT
Rose Gardens is looking into investing opportunities. The following are potential
opportunities:

Zipliners R Us is a fairly new business with a market price of $30 and Rose Gardens
anticipates that their dividends will grow at a rate of 3% for the foreseeable future.
The next dividend is expected to be $1.50.

RBC Royal Bank is issuing bonds at a selling price of $950. The par value of the
bond is $1,000 and RBC is offering a coupon rate of 6%. Interest is expected to be
paid annually. These bonds will mature in 5 years.

Massy Ltd on the other hand is a matured company so their dividend has not changed
in years. Their last dividends paid was $2.00. Massy Ltd. stock is currently being
sold at $30.

Microsoft Inc.is currently being sold at $150 per share. Rose Gardens found out that
last year they paid dividends of $1.44 and they anticipate that the dividends would
grow at a rate of 8% for years 1 & 2, then it would increase to 10% in years 3 & 4 and
finally level off thereafter with a growth rate of 4% until infinity.
After calculating the value of each of these securities, recommend to Rose Gardens which
investment will make the most sense if they have $50,000 to invest and the expected rate of
return for all securities mentioned above is 5%. Make sure to support your answer with
workings and explanations.