Bonne Bia limited is a newly formed company in the catering business founded by Kate and Paul Johnson. Kate and Paul have considerable experience in the food industry and saw an opportunity to establish a food/beverage business to service the tourist market during the four months from May to August. The business will be located in Wexford and permission has been obtained from Wexford County Council (WCC) to operate a food/beverage outlet near Curracloe beach. At present Kate and Paul are trying to decide between two possible food/beverage options. Pertinent information relating to each of the options is shown below. Initially, Kate and Paul intend to operate the outlet themselves without employing any other staff.
The following is a summary from the cash book of BW Ltd for July 2015:
On investigation, it was discovered that:
i) Bank charges of TZS 15 shown on the bank statement have not been entered into the cash book.
ii) A cheque drawn for TZS 110 to pay a supplier has been entered in the cash book as a receipt.
(a) The dividend growth model can be used in determining the cost of equity capital.
This model, however, has some weaknesses.
Outline the weaknesses of the model.
(b) The following information is available regarding a mutual fund: