- This topic has 3 replies, 2 voices, and was last updated 10 years ago by
.
Viewing 4 posts - 1 through 4 (of 4 total)
- Posts
Hello,
In December 2012 Q4(a)
while calculating growth using gordon growth method, and calculating retention ratio, examiner took all past PATs and dividends, basically he made a average retention ratio of 41%Is is acceptable to use latest retention ratio, i only used last years divide and PAT to ensure current retention rate ?
my retention ratio came to be 40%, very close but still led to 12 million difference when calculating Market capitalisation later on.You would lose one or two marks but not more – it would make more sense to use the average rather than just one year.
Should we always use average retention ratio in gordon growth formula? or just when valuing an entity?
Viewing 4 posts - 1 through 4 (of 4 total)
- You must be logged in to reply to this topic.