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
A total of $426,000 seed-funding would be ideal to start the project on a local basis. The cost analysis done above is for the material required to perform the work, and as the wor

Q. What is the requirement of Working Capital? Ans. Meaning of Working Capital: - Working capital management is a significant aspect of financial management. In business money

Question 1 Describe the types of investment decisions Question 2 List the main features of ordinary shares Question 3 List the assumptions of Walter's dividend model. Ex

Entity A is significantly smaller than B in terms of revenue and would not impact LOP's revenue to the same extent. However A earns a noticeably better gross profit margin at 26% a

Q. Demerits of profitability index method? Demerits of PI method:- (i) This method is complicated to understand and implement (ii) Calculations in this method are complex

Discuss and compare hedging transaction exposure by using the forward contract vs. money market instruments. While do the alternative hedging approaches generate similar result?

Explain about the in-quote-driven according to trade intermediation. In quote-driven dealer markets, a market-maker or dealer is onto one side of each trade. (Remember that dea

Explain contingent exposure and define the advantages of using currency options to manage this type of currency exposure. Answer: Companies may come across a state where they m


Is the difference between the market value of the shares (capitalization) and their book value a good measure for the value creation in a company since its foundation? Value cr