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Sir, I know that in dgm we take ex div, so if we have cum div price we subtract the latest div from it and then use it in the formula, right?
The examiner reports usually say ”One common error was not including the value of a dividend about to be paid in the dividend growth model, if the share was cum dividend. ”
Um not including means not subtracting only yeah?
Your first sentence is correct.
The comment from the examiners report will refer to using the model to arrive at the market value. The formula gives the ex div value and so if the share is cum dividend the dividend needs adding. (If the statement was in fact referring to calculating the cost of equity then the examiner has used poor English and instead of writing ‘not including’ he should have written ‘not taking into account’.)
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