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BENTO CO (JUN 15)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › BENTO CO (JUN 15)

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • February 18, 2021 at 12:21 pm #610845
    Jiya024
    Member
    • Topics: 168
    • Replies: 56
    • ☆☆☆

    Quoting a line from this question’s answer to part c):

    “Although the future potential of the company represented by the dividend valuation model, rather than the current value of the assets, is probably a better estimate of the potential of the company, the price of $60 million seems excessive.”

    Sir does this statement suggest that current value of the assets is a better estimate of future potential of a business than dividend valuation model? Or is it the other way round. Am getting confused because of the way the sentence is framed.

    February 18, 2021 at 2:43 pm #610863
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54738
    • ☆☆☆☆☆

    It is the other way round 🙂

    The dividend valuation model gives a better estimate that the asset values (because it is a better estimate of the potential of the company).

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