Explain how the market value of the shares, Operation Management

Assignment Help:

St James Ltd. Has just paid a dividend of £0.22 per share. The market expects this dividend to grow constantly in each future year at the rate of 7% p.a. The cost of capital for St James Ltd. is currently 9%. As soon as the dividend was paid, however, the Board of St James Ltd. decided to finance a new project by retaining the next three annual dividend payments. The project is seen by the market to be of riskier than existing projects and the cost of capital is estimated to be 10%. It is expected that the dividend declared at the end of the fourth year from now will be £0.30 per share and will grow at the rate of 8% p.a. from then on.

You hold 1,000 shares in St James Ltd. and your personal circumstances require that you receive at least £200 each year from this investment.

(i) Assuming that there is a perfect market in St James Ltd's shares, and that the market uses a dividend valuation model, show how the market value of the shares has been affected by the Board's decision


Related Discussions:- Explain how the market value of the shares

How you would address project management situation, MBTI and Keirsey Temper...

MBTI and Keirsey Temperament Sorter Describe the challenges you foresee in using the MBTI instrument or Keirsey Temperament Sorter in a project management situation and how you wo

Explain contrast push and pull methods of moving goods, Contrast push and p...

Contrast push and pull methods of moving goods and materials through production systems

Explain what is controlling, Explain what is Controlling. Controlling i...

Explain what is Controlling. Controlling is defined as which managerial function that seeks to ensure an absolute conformity of actual performance through organizational person

Do whole foods markets mission and vision, Do Whole Foods Markets mission/v...

Do Whole Foods Markets mission/vision and the core values as presented in cases Exhibit 1 and 3 really matter? Are they real or just cosmetic window dressing? What evidence can you

Explain what is the optimal opder quantity for coffee, A special coffeehous...

A special coffeehouse sells Colombian coffee at a fairly steady reat of 30 pounds per month. The beans are purchased from a local supplier for $3.20 per pound. The coffeehouse esti

How feedback either promoted, How feedback, Goals Competence, and motive ha...

How feedback, Goals Competence, and motive has have either promoted or stunted performance in your own experiences at work.

Explain maintain its strong brand images, impressive portfolio includes som...

impressive portfolio includes some of the strongest brand names in the world. Additionally, P&G must study its consumers, use long-term perspectives, employ product innovation and

Explain what is the value of the coefficient, Forecasting 1. Briefly des...

Forecasting 1. Briefly describe when qualitative versus quantitative forecasting methods would be used? 2. Linear Regression. a. Describe what linear regression is and how

Forecasting, The cafeteria supervisor at CarWash is interested in developin...

The cafeteria supervisor at CarWash is interested in developing a forecast model for the number of meals to be prepared each day. The following daily data from the cafeteria’s regi

Describe the difference between consumer products, Explain the difference b...

Explain the difference between consumer products and business products. Why are some products difficult to categorize as one or the other? Give an example of a business product, a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd