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I wanted to ask one question, can I use the arithmetic growth [ ( Div Y1 + Div Y2 + Div Y3 + Div Y4)/4] rate instead of the Geometric Growth rate for calculating “g” with regards to Dividends ?
Because
1.) I don’t have a scientific calculator.
2.) I never used one ( scientific calculator) and I don’t really want to waste my time trying to learn how to use one.
3.) I can do the calculation when 5 years dividends or 3 years dividends are given but I can’t do it, when they give 4 years since that means it’s the cube root of ( year 1 dividend / year 4 dividend). And I asked a few of my peers and none know how to do it on the normal calculator.Bro aside from what our respected Mr:john answers, i would suggest that you check whether this arithmatic method of yours gives the same answer as the formula method, and if it does, congrats:-) you wont need a scientific calc then:-)
Hey thanks, and one thing it doesn’t but a lot of different type of calculations for different things, gives different answers, all of which are correct. But this arithmetic method I illustrated is definitely wrong. One I just want to know what I can do now that I don’t have a scientific calculator, does anyone know how to do it on a basic calculator or whatelse could I possibly do…
Bro if you have the RAISE TO THE POWER OF option on ur simple calc then do this:
e.g cube root?
step one: 1/3
step two: solve the equation till u need to take the root.
step three: type the answer and press RAISE TO THE POWER OF button on ur calc and type the decimal answer of 1/3.
step four: press ANS .
otherwise i do not think u have an option.
tc:-)Hey Saad,
Thank you for your reply, but the normal calc doesn’t have a raised to the power of button. Nonetheless I got a way to do it, it’s a little long, but I guess I have to do it. Here’s the method, incase there is anyone seeing this, who has my predicament:1) Write the number on your calculator
2) Press the square root button 12 times
3) Subtract 1
4) Divide by n where n is the nth root. For example if you are finding the cube root of a number, n will be 3.
5) Add 1
6) Press “multiply button and then equal to button” 12 times i.e. multiplty equal to multiply equal to …..I have answered this question a few minutes ago.
Firstly, the arithmetic average is wrong for growth rates.
Secondly, whenever the exam has required you to estimate dividend growth rate using past dividends, there have always been four years of growth and so you can use the square root button twice.
Thirdly, you should get a scientific calculator – you will definitely need it for other exams!
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