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- April 20, 2018 at 1:37 pm #448253
Sir,
The Formula to find the current share price using Dividend Growth Model is
Po = (do(1+g)/Ke)-gIn 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 #448267The 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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