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Hi, dear teacher.
I need your help
A company has just paid an ordinary share dividend of 32.0 cents and is expected to pay a dividend of 33.6 cents in one year’s time. The company has a cost of equity of 13%.
What is the market price of the company’s shares to the nearest cent on an ex dividend basis?Why we did not increase 33.6 cents by 5%?
Thank you in advance for your help.
It would rather help if you had given the name of the question 🙂
However, I am assuming that you are referring to the dividend valuation formula.
The numerator in the formula is Do (1+ g).
Do is the current dividend which is 32.0c.
32 x 1.05 = 33.6c
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