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

Risk premium of a stock, (a) RBC has 100 loans outstanding, each for $1 mil...

(a) RBC has 100 loans outstanding, each for $1 million, which it expects to be repaid today.  Each loan has a 5% probability of default, in which case the bank is not repaid anythi

Making income statements, i have the information given but i am having trou...

i have the information given but i am having trouble getting the income statement done correctly

Comparison a competing firm-analysts earnings estimates, Comparison to a Co...

Comparison to a Competing Firm In Mergent Horizon, return to the competitor page, but now enter the list of competitors "As Defined by the Company."  From this list select a f

Comparison between modern and traditional methods, Comparison between Moder...

Comparison between Modern and Traditional Methods Both modern and traditional methods will indicate or show strong weaknesses which like a company cannot use either to choose

What are the methods of underwriting, What are the Methods of Underwriting ...

What are the Methods of Underwriting An underwriting agreement may take any of the below three forms: (i) Standing behind the issue: Under this method, underwriter guarant

Calculate interest rate, Imagine Joy is the manager of a bank named Money ...

Imagine Joy is the manager of a bank named Money Talks Bank of Virginia . This bank has recently issued new loans to customers. Joy wants you, the business analyst to prepare a re

Cbk - monetary policy, CBK - Monetary Policy The money supply in the e...

CBK - Monetary Policy The money supply in the economy has a main effect on both the rate of inflation and the level of economic activity. The level of money supply is controll

Find the no-arbitrage cost of the european call option, Question: Suppo...

Question: Suppose that a security is presently selling for a price of $65, the nominal interest rate is 8%, and the security volatility is 0.15. a) Determine Delta of a Euro

Cost of capital, Cost of capital: The cost of capital is a term relate...

Cost of capital: The cost of capital is a term related to the field of financial investment to refer to the cost of a company's funds (both equity and debt), from an investor'

Finance applicatios and theory, Zoeckler Mowing & Landscaping''s year-end 2...

Zoeckler Mowing & Landscaping''s year-end 2012 balance sheet lists current assets of $436,500, fixed assets of $551,500, current liabilities of $417,900, and long-term debt of $317

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