Hi everybody i am stuck in the 2nd Q of bpp revision book. anybody can explain what “general price index” means? i cant find the connection how they used there and there is no explanation!!! thanks
GPI refers to the rate of inflation for each year. For this question you are required to find the growth in dividends per share for each year. “Nominal” dividend growth includes inflation, whilst “Real” dividend growth strips inflation out.
When you have calculated the nominal growth for each year you need to repeat the process, but this time adjusting the DPS figure by striping out inflation, to find the “real” growth in Dividend per share. i.e. DPS divided by GPI = real dividend per share (with inflation stripped out). Do this for each year and you can then calculate the Arithmetic Growth and the Equivalent Annual Growth as normal.
Sorry – meant to type DPS divided by GPI x 100 = real dividend per share
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