Comments

  1. avatar says

    hi sir I was revising this for p4 in june attempt and in example 1 we got a return of 12.5%. I just want to ask that will we be giving this return on the nominal value or on the market value because if we give this on nominal value the dividend would decrease from 30c to 12.5c?

    • Avatar of John Moffat says

      The market value of a share is determined by the dividend they expect and the rate of return that they require.

      So the required return (and therefore the cost of equity) is calculated using the expected dividends and the market value (not the nominal value).

  2. Avatar of sonria says

    Hi Sir,
    Thank you for showing us how to calculate to the fourth root, however you didn’t mention how to calculate to the fifth root if five years is given in the exam. Would it then be a matter of calculating to the third root and then to the second root? Or calculating to the second root first and then the third root second? Or is there another way?
    Thanks for your help and quick response as exam is only 3 weeks away :)
    Sonria.

Leave a Reply