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ACCA F9 lectures ACCA F9 notes
Laiq Hussain says
October 30, 2016 at 11:17 am
Does the Dividend valuation model: “The MV is the PV of future expected dividends, discounted at the shareholders required rate of return” applies to unquoted companies as well?
Does the same dividend valuation model formula Do (1+g) / re-g is called Gordon growth model ?
John Moffat says
October 30, 2016 at 1:36 pm
In theory it applies to all companies – quoted or unquoted.
October 31, 2016 at 4:08 am
In study texts, we have Gordon growth model. Is it the same Dividend valuation model or different?
October 31, 2016 at 7:07 am
The same 🙂
October 25, 2016 at 6:19 am
Hi Mr. Moffat,
In the notes of this chapter, we have heading “The valuation of equity – non-constant dividends” but there is no example of non-constant dividend below the notes anywhere. There is only one example which is for constant dividend only.
PS: My mistake, I posted it somewhere else before.
October 25, 2016 at 7:40 am
But that section carries on to explain about non-content dividends – read it carefully and look at example 5 and example 6!
(I hope you are watching the lectures – the lecture notes should not be used on their own because it is in the lectures I explain and expand on the notes.)
October 25, 2016 at 11:17 am
Yes, I am watching. I am not sure that questions like below is in the syllabus of F9 or not. If it is in the syllabus, can you please help me solving it?
The current dividend on a stock is $2 per share and investors require a rate of return of 12%.
What is the price of the stock if dividends are expected to grow at a rate of 20% per year over the next three years and then at a rate of 5% per year from that point onwards.
October 25, 2016 at 3:17 pm
Yes – it is in the syllabus and is often asked.
But you must ask this sort of question in the Ask the Tutor Forum and not as a comment on a lecture.
December 2, 2015 at 9:22 pm
As obvious as it seems but it just didn’t make sense to me as to why we added the dividend about to be paid to the ex-dividend amount to calculate cum-div. I was going to subtract it so my concept must be totally wrong there. Could you explain?
What I also didn’t understand is that in the case of Ex-Div when we say that the dividend has just been paid then the shareholders must immediately receive the dividend, so why in that case the dividend will be paid after a year.
December 2, 2015 at 11:50 pm
Lets assume a share is valued on an ex div basis at $100 based on FUTURE dividends and growth etc. Well if a dividend has just been paid, we have missed it, so we look to value the share based on the normal ex div method. Now lets say that the same $100 share is carrying a dividend which is just about to be paid…lets say the dividend due is $2. Well now the share is still valued at the $100 based on its future dividends, but that share is also carrying and extra $2 value because of the due dividend. So the dividend about to be paid is added to the ex div value. I hope this makes sense, and I hope John does not mind me offering help.
December 3, 2015 at 7:09 am
If you buy a share cum div then you will then immediately get the current dividend, whereas if you buy it ex div you will not get the current dividend (because it has already been paid) and will have to wait a year to receive your first dividend.
Therefore you will be prepared to pay more if you are buying a share cum div.
March 31, 2015 at 6:28 pm
i was just looking at the papers and came across this question; TKQ Co has just paid a dividend of 21 cents per share and its share price one year ago was $3·10 per share. The
total shareholder return for the year was 19·7%.
Im confused as none of the formulas work on this , can you please clarify
March 31, 2015 at 11:11 pm
It is not using a formula from the formula sheet.
The shareholder return for the year is the dividend plus the increase in market value, as a percentage of the market value.
So the total return here is 19.7% x 3.10 = 0.61.
Sine the dividend is 0.21, the market value must have increased by 0.40.
December 4, 2013 at 8:23 pm
I am a little confused between e.g #2 and #4 which basically asked the same question and obviously had the same answer. I am trying to understand your explanation about using the present value to find the market value in #4. Was this to show the two ways of getting the same answer?
December 4, 2013 at 8:43 pm
I don’t understand why you are confused.
If you have finished the lecture you will realise that usually we simply use the formula that is given in the exam. However, given that 50% of the exam is writing as opposed to arithmetic, it is desperately important that you understand the logic behind what we are doing and the premise that the market value is the present value of future expected dividends.
December 4, 2013 at 10:52 pm
okay! understood! Thanks!
November 28, 2013 at 2:28 pm
June 2008 past paper Ques 2 (d)
The P/E ratio of 7.5 is used to determine the Present Value of $720,000 of the after-tax savings (96,000 x 7.5 = $720,000).
How is it possible to use the P/E ratio to determine the present value? I think i understand “why” we use it, i just didn’t realize the P/E ratio could be used to determine the PV.
I apologize for asking this question here but i couldn’t find the Ask the Tutor page.
November 28, 2013 at 3:37 pm
He should not have used the term present value. The P/E ratio does not replace discounting and does not give a present value in that sense.
What he means is that the value of a share (using the P/E approach) will be the EPS x P/E ratio.
So……if the earnings increase the the market value increases.
(PS To find the Ask the Tutor forums, click on ‘forums’ on the bar at the top of this page, and then click on ‘Ask ACCA Tutor’. Then you will get a list of the Ask the Tutor forums for each paper)
November 28, 2013 at 7:54 pm
Okay, got it now. Thanks very much for your help. You’re a wonderful tutor, you always make things so easy to understand. (and thanks also for the link information)
November 28, 2013 at 8:26 pm
You are welcome – and thank you 🙂
November 16, 2013 at 6:11 pm
Mr John, I have got a question – Why is that when we have a question that includes shares at par of say 25c we have to divide the share by 0. 25 in order to turn it into a $1 share? (to calculate rights issue for example) and then we want to include the shares in the balance sheet, we multiply by 0.25 in order to turn it again to a share of 0.25c!
Sorry if this is a dumb question, this point always confuses me, I have no idea why do we need the share to be a $1 share? Why not just perform our calculations on a 25c share?
November 16, 2013 at 6:18 pm
We do perform our calculations on 25c if that is the nominal value.
What I am guessing you are confusing it with is that quite often in questions you are told the total nominal value of the shares (an extract from the Statement of Financial Position) and we need the number of shares.
So…..if the nominal value is 25c a share and the SOFP figure for share capital is $100M, then $100M is the total nominal value of all the shares and so there must be 400M shares of 25c.
We never turn them into $1 shares – ever 🙂
November 16, 2013 at 6:32 pm
I see, lol! It was a dumb question !!
Thank you Mr John.
Hoping to pass!
November 16, 2013 at 6:35 pm
No problem 🙂
kenton spencer says
November 2, 2013 at 12:58 am
i cannot seem to view the videos
November 2, 2013 at 7:20 am
The videos are all working fine – the problem must be at your end.
Have you looked at the technical support page? You will likely find support for your device there.
November 2, 2013 at 12:57 am
i cannot see to view the videos
June 27, 2013 at 2:42 pm
Why is it only the future expected dividend that effects the theoretical value of the share price? Why wouldn’t the expected capital gain of the share be a consideration too for instance? Thanks.
June 28, 2013 at 10:20 am
In theory, it is the expected dividends that affect the share price. If the dividends are expected to grow, then over time the share price will grow (and therefore we have a capital gain). However the only reason for the capital gain is because of increased expectation of dividends. (All in theory, obviously 🙂 )
June 28, 2013 at 11:29 am
I see! Thanks for explaining that for me.
April 25, 2013 at 8:15 am
Could you help me understand why share prices on the stock exchange keep changing every day but for the same companies? for sure I know that dividends from what we have learned is a factor but not paid daily I guess and so is interest rate.
April 25, 2013 at 6:01 pm
The share price is based on what investors expect in the future.
So although dividends are a factor, it is expected future dividends.
News about the company comes out all the time (and also about the state of the economy – which affects companies).
If there is news that makes investors expect the company will do better in the future, then they will be prepared to pay more for the shares – and so the share price will increase.
If there is news that makes investors expect that the company will do worse in the future, then the share price will fall.
April 26, 2013 at 1:09 pm
Very clear. Awesome!!! Thanks alot
April 27, 2013 at 1:16 am
You are welcome 🙂
November 2, 2012 at 4:52 pm
how could i see the book in which the tutor solve example or understanding..pleas guid
April 25, 2013 at 6:02 pm
If you look above the video, it says that the lectures are based on our Course Notes!!! You can download them on this website.
August 25, 2012 at 6:15 pm
Does the lecture have mobile phone version? Like hw many megabytes do I need to have b/4 watching the lecture whether on phone or laptop computer?
August 25, 2012 at 11:13 pm
most lectures are on average 15-30MB
June 8, 2012 at 2:35 pm
if there is any chance of me passing my ACCA papers it’s all due to this amazing website…. the lecturers are just superb and everything they say is engrained into our brains.. 🙂
November 2, 2012 at 4:54 pm
@safwanjaffary, what meterial are use for f9?
November 3, 2012 at 9:31 am
@umair112, i am studying F9 from BPP study text and the notes provided here on opentuition.
March 29, 2012 at 8:38 am
This lecture has really helped me to understand rather than just cramming formulars to the exam
March 9, 2012 at 10:57 pm
admin this video stops every aftr 2min.plz do somthing
March 10, 2012 at 9:04 am
maybe your internet is slow. lecture plays fine
February 17, 2012 at 11:21 pm
thanku so much my doubts are clear now…..
October 28, 2011 at 7:07 am
this particular lecture keeps stopping and stare ting, been here since 7am and I’ve not even made it half way the lecture. All other lectures are top notch.
October 28, 2011 at 7:42 am
Wait for the lecture to fully load before you press play
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