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BPP – IML Co – Question 195

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › BPP – IML Co – Question 195

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 21, 2018 at 9:51 am #438191
    malikjitin
    Member
    • Topics: 5
    • Replies: 8
    • ☆

    During the year IML Co paid a dividend of 15C per share. At the year end share price was $3.15. Share price at the start of the year was $2.50.

    What is the shareholder return over the period.

    John – I do not understand why in the answer – 15c has been added to the share price.

    Thanks

    Jitin

    February 21, 2018 at 10:53 am #438222
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54759
    • ☆☆☆☆☆

    The share price has increased by 3.15 – 2.50 = 0.65
    The dividend is 0.15.

    Therefore the total return is (0.65 + 0.15) / 2.50 = 32%

    (I am away from home until tonight and so cannot check with the BPP revision kit until tonight. If the answer in the kit is different then do check that you have copied the question correctly 🙂 )

    February 21, 2018 at 11:01 am #438227
    malikjitin
    Member
    • Topics: 5
    • Replies: 8
    • ☆

    Thanks John.

    But my understanding is the the share price in the end of the year already includes the effect of the dividends paid within the year. So we should take 15c off from 3.15 before calculating. …..!

    February 22, 2018 at 7:47 am #438302
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54759
    • ☆☆☆☆☆

    No. How can the share price at the end of the year include dividends that have been paid??

    Have you watched my free lectures on this?

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