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- This topic has 5 replies, 2 voices, and was last updated 4 years ago by John Moffat.
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- July 29, 2019 at 3:30 pm #525250
Hi
is dividend growth of 10% and dividend inflation by 10% every year the same thing?Thanks
July 29, 2019 at 5:55 pm #525271Yes 🙂
July 29, 2019 at 6:43 pm #525278ok good but if the dividend growth/inflation is at different rates every year e.g not a constant then how we are going to calculate the cost of equity?? because in BPP FM study text in the chapter of inflation and taxation there is an example of inflation number 3 which i am little bit confused of.
July 30, 2019 at 9:01 am #525424You are confusing two things.
In your first question. you asked if dividend growth. and dividend inflation are the same thing, and they do mean the same.
However, the dividend growth rate is the rate at which dividends are inflating and this is relevant for calculating the cost of equity.
The general inflation rate is not the same thing and this applies to the cash flows when appraising a project. It has nothing to do with the rate at which dividends are growing.
I do suggest that you watch my free lectures. They are a complete free course for Paper PM and cover everything needed to be able to pass the exam well. If you are watching the lectures you do not really need the Study Text (but you do need a Revision Kit however you choose to study, because question practice is vital to passing the exam).
July 30, 2019 at 10:00 am #525488ok thanks
July 30, 2019 at 2:43 pm #525597You are welcome 🙂
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