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Hi
is dividend growth of 10% and dividend inflation by 10% every year the same thing?Thanks
ok good but if the dividend growth/inflation is at different rates every year e.g not a constant then how we are going to calculate the cost of equity?? because in BPP FM study text in the chapter of inflation and taxation there is an example of inflation number 3 which i am little bit confused of.
You are confusing two things.
In your first question. you asked if dividend growth. and dividend inflation are the same thing, and they do mean the same.
However, the dividend growth rate is the rate at which dividends are inflating and this is relevant for calculating the cost of equity.
The general inflation rate is not the same thing and this applies to the cash flows when appraising a project. It has nothing to do with the rate at which dividends are growing.
I do suggest that you watch my free lectures. They are a complete free course for Paper PM and cover everything needed to be able to pass the exam well. If you are watching the lectures you do not really need the Study Text (but you do need a Revision Kit however you choose to study, because question practice is vital to passing the exam).
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