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

Ask an Expert

Your posts are moderated

Write your message here..

Related Questions

Explains the reason for the negative synergistic gains, What can be the rea... What can be the reason for the negative synergistic gains for British acquisitions of U.S. firms? Negative synergies for British acquisitions of U.S. firms (united state firms) m

Operating cycle, how can an operating cycle be applied to a poultry busines... how can an operating cycle be applied to a poultry business

Determine in brief about venture capitalists, Determine in brief about Vent... Determine in brief about Venture capitalists Venture capitalists are organisations which take on risky business ventures. They provide finance for and generally require a high

What does weighted average cost of capital, What does the "weight" refer to... What does the "weight" refer to in the weighted average cost of capital? The weight pass on to in weighted average cost of capital refers to the portion of the total capital in

Companies accuse investors of performing credit sales, At times, companies ... At times, companies accuse investors of performing credit sales that they make their quotations fall. Is that true? It is true: there are companies that accuse investors who pe

What is a marginal cost of capital schedule (mcc), What is a marginal cost ... What is a marginal cost of capital schedule (MCC)?  Is the schedule always a horizontal line?  Explain. The marginal cost of capital schedule is a graphic representation of the

Capital structure decisions: the basics, i want some presentation slides of... i want some presentation slides of this chapter from page 570 to 580

What is benchmarking, What is Benchmarking "A continuous, systematic pr... What is Benchmarking "A continuous, systematic process for evaluating the products, services and work processes of an organisation that are recognised as representing best prac

364-day t-bills, 364-Day T-Bills The Government considered that it is i... 364-Day T-Bills The Government considered that it is important to develop government securities market for monetary control. It also had an intention to ensure that government'

Effective duration and convexity of callable bonds, The modified dura... The modified duration is a measure of the sensitivity of a bond's price to interest rate changes; the assumption made here is that the expected cash flow does not