What are assumptions of walters dividend model, Financial Management

Q. What are assumptions of Walters dividend model?

1. Constant Return and Cost of Capital: - The Walter' model presume that the firm's rate of return and its cost of capital are constant.

2. Internal Financing: - All financing is complete through the retained earnings that is external sources of funds like debt or new equity capital aren't used.

3. 100% Payout or Retention: - Every earnings are either distributed as dividends or reinvested internally immediately.

4. Constant Earnings per share as well as Constant Dividends per share:-

There is no change in key namely, variables, beginning earnings per share and dividend per share.

5. Infinite Time: - The firm has a extremely long life.

Walter's Formula for formative the value of a share:-

D + r / Ke (E-D)

Where P = Market price per share

D = Dividend per share

E = Earnings per share

r = Internal Rate of Return

K = Cost of Equity Capital or Capitalisation Rate e

Posted Date: 8/5/2013 3:24:25 AM | Location : United States







Related Discussions:- What are assumptions of walters dividend model, Assignment Help, Ask Question on What are assumptions of walters dividend model, Get Answer, Expert's Help, What are assumptions of walters dividend model Discussions

Write discussion on What are assumptions of walters dividend model
Your posts are moderated
Related Questions
What are compensating balances and why do banks require them from some customers?  Under what circumstances would banks be most likely to impose compensating balances? Compensa

How do we calculate the payback period for a proposed capital budgeting project? What are the major criticisms of the payback method? We compute the payback period for a proposed

Due to the complexity of the tasks involved in many projects, communication of responsibility for those tasks is often helped by means of graphical planning techniques.

Wing Yin Tsui, CEO of Lian Huang & Wong Bin Dean Hwang Manufacturing Limited is considering a four year project. The project requires an initial investment of $10,000,000 to buy ne

You are required to compute the value of both the firms using Net Income approach.

The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net income

Standard Deviation An investment must be evaluated on two dimensions - rate of return and risk. An investor cannot enjoy a high return without any exposure to risk.  The higher

Compound options are usually cheaper than vanilla options and we know that there are four main types of compound options: a call on a call; a put on a call; a call on a put; a put

Question 1 Describe the Cost Volume Profit analysis. Explain its features, objectives and elements(CVP analysis) Question 2 Write in detail about the classification of

the procedures, techniques or strategies that could or should be implemented to reduce the likelihood of harm > actions that could be taken to eliminate the hazard or reduce the r