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could you explain how to get answer

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › could you explain how to get answer

  • This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • September 22, 2019 at 10:16 am #547060
    jean989
    Participant
    • Topics: 29
    • Replies: 9
    • ☆

    1. If eps is 100 at the end of this year and 140 at the end of next year what will the dps be the following year if the retention ratio is 60%?

    40% growth so eps following year = 140 x 1.4 = 196. Retained is 60% so DPS is 196 x 40% = 78.4

    September 22, 2019 at 10:35 am #547074
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    But you have typed out the answer yourself, so say which bit of it is not clear to you and then I will explain 🙂

    September 22, 2019 at 12:14 pm #547080
    jean989
    Participant
    • Topics: 29
    • Replies: 9
    • ☆

    dont know which formule it used to arrived at answer

    what is the logic

    thanks

    September 22, 2019 at 3:05 pm #547092
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    It is only using the formulae for earnings per share and dividend per share (which if you have forgotten from Paper FA (was F3) are revised in my free Paper FM lectures).

    The earnings from this year to next year increase by 40/100 = 40%.

    So if we assume that the earnings continue to grow at 40% per year, then in the following year they will be 140 + (40% x 140) = 196.

    They are retaining 40% of their earnings, and do only the remaining 60% of the earnings will be paid as dividend. So the dividend will be 60% x 196 = 78.4

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