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Example of Market Model
Illustration:
For the past five (5) years, the MPS and DPS for XYZ Ltd were follows as:
1998
Shs.
1999
2000
2001
2002
MPS as at 31st Dec
DPS for the year
40
-
45
3
53
4
50
52
Required
Determine the estimated cost of equity/shareholders percentage yield for every of the years included.
Solution
Year MPS Capital gain DPS % Return 1998 40 - - - 1999 45 5 3 (5+3 /40) * 100 = (8/40) * 100 = 20% 2000 53 8 4 (8+4 /45) = (12/45) * 100 = 27% 2001 50 -3 3 (-3+3 /53) = (0/53) * 100 = 0% 2002 52 2 - (2 +0 /50) = (2/50) * 100 = 4%
Year
MPS
Capital gain
DPS
% Return
5
(5+3 /40) * 100 = (8/40) * 100 = 20%
8
(8+4 /45) = (12/45) * 100 = 27%
-3
(-3+3 /53) = (0/53) * 100 = 0%
2
(2 +0 /50) = (2/50) * 100 = 4%
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