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Dartig Company

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Dartig Company

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • April 20, 2018 at 1:37 pm #448253
    ziniya
    Member
    • Topics: 14
    • Replies: 4
    • ☆

    Sir,

    The Formula to find the current share price using Dividend Growth Model is
    Po = (do(1+g)/Ke)-g

    In this question why is Ke being subtracted by g, where as
    firstly do(1+g)/ke should be solved and then resulting value should be subtracted form g.

    Please correct me where I am wrong and please guide me further

    Thanks

    April 20, 2018 at 3:53 pm #448267
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The formula is given on the formula sheet (and you are not required to prove it!!), but it is not as you have written.

    It is: Po = Do(1+g) / (Ke – g) (the formula sheet uses Re instead of Ke, but they are different symbols for the same thing).

    So no – you calculate Do(1+g) and then divide what you get by (Ke – g).

    All of this is explained in detail, with examples, in my free lectures, and as I have told you before you cannot expect me to type out all of my lectures here 🙂

    The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam. Watch the lectures, and then practice every question in your Revision Kit.

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