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

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