Example of dividend basis valuation, Finance Basics

Assignment Help:

Example of Dividend Basis Valuation

Company Laxmi Synthetics pays a dividend of 10% on its Sh.60 par value ordinary shares.  This company uses a discount rate of 15%.  Assuming no growth, calculate the value of its ordinary share if there's growth of 5%, what would be the value of this company's ordinary shares.

a) P0 =  D0 / Ke           

    P0 =  6 /15%

          = Sh.40 (no growth)                                                                                                   

b) P0 =  6(1.05) /0.15-0.05

         = Shs.63 (5% growth rate)


Related Discussions:- Example of dividend basis valuation

Similarities between equity finance and preference, Similarities between Eq...

Similarities between Equity Finance and Preference Similarities among Equity Finance and Preference are as follows: a) Both may be permanent whether preference share capita

Circle the new equilibrium if there is an increase in price, a.  In the acc...

a.  In the accompanying diagram (which represents the market for chocolate candy bars), the initial equilibrium is at the intersection of S1 and D1. Circle the new equilibrium if t

Terms used in capital market authority, Terms used in Capital Market Author...

Terms used in Capital Market Authority 1. ACCOUNTS fourteen (14) days durations into that the stock exchange trading calendar is divided. 2. ACCOUNTS DAY - Sixth or sev

Ros - return on sales-profit margin , ROS - Return on Sales (Profit Margin)...

ROS - Return on Sales (Profit Margin) The Average of the industry ROS was 5.18% for 2004, 4.41% for 2005, and 7.20% for 2006. The chart showed that ROS has been declined f

Floatation of new shares, Floatation of New Shares Rules for floatati...

Floatation of New Shares Rules for floatation of new shares The company must contain an issued share capital of at least Kshs.20 M. The company must contain c

Compute appropriate net present value, Imagine Joy is the project coordinat...

Imagine Joy is the project coordinator in a company where four projects are running concurrently. He's employed you as the senior business analyst to perform some financial calcula

Timing of investment a stock exchange, Timing of Investment a Stock Exchang...

Timing of Investment a Stock Exchange The ideal way of creation profits on the stock exchange is to buy on the bottom of the market or lowest M.P.S and sell at the top of the

Working capital, #question.component.of working capital

#question.component.of working capital

Proforma balance sheet, Proforma Balance Sheet This refers to the proj...

Proforma Balance Sheet This refers to the projected balance sheet at the finish of forecasting period.  The items in the proforma balance that vary with sales would be determi

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