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Sir, can you please explain (a) part of Q4. Calculate the value of GXG Co under option 1 and advise whether option 1 will be acceptable to shareholders.
You must ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other.
The dividend growth formula gives the MV if the dividends start growing immediately and so the dividend in 1 year is the current dividend plus growth.
In this question the dividends start growing 2 years later and so we need to discount the value from the formula by 2 years to get a current value.
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