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Dear John,
Can you please expain how the examiner calculated the dividend growth rate after year 4 in part (c) of the question?
i didn’t understand how the examiner found out, annual growth rate after year 4 as 7.5%*18.7*40%If you are looking at an answer in the revision kit and they really have typed the workings like that, then it is a typing error 🙂
The average growth rate over the first 4 years is 18.7%
The question says that the growth rate will fall by 60% (i.e. fall to 40%) and so it will fall to
40% x 18.7% = 7.5%Yes, I was checking the answer in the Revision Kit.
I was confused with the dividend valuation model steps.
Thankyou John.
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