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Beta plc is about to pay a dividend of $0.40 per share dividends are growing at the rate of 5%p.a.
The shareholders required rate of return 20%p.a.
The rate of corporation taxis 25%.
what is the current market value per share?Please show working. Thanks
Have you watched the free lectures?
This is a standard question using the dividend growth formula from the formula sheet.MV ex div = (0.40 x 1.05) / (0.20 – 0.05) = $2.80
They are about to pay a dividend, so we need the cum div value = 2.80 + 0.40 = 3.20
Sir, can you tell me when to use cum – div and ex-div?
Aren’t Share prices always quoted at ex-div?
Thanks
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