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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › GXG Co
hello sir, I didn’t understand the numerical part of this question’s required number a.
Please make me clear
The dividend valuation formula gives the current market value of a share (i.e. Po) assuming that the first dividend is in 1 years time.
Here, the first dividend is in 3 years time (2 years later than in 1 years time), and therefore using the formula will give a market value 2 years later (i.e. at time 2) and therefore needs discounting for 2 more years to get a market value now.
And on the same question’s (1.6*1.3)/(0.09-0.03) is done to calculate present value of dividend using rate 3%.
My question is how 1.6 figure is calculated/ taken because i did’nt find this figure in question
It is given in the question!!!
The total dividends are currently 1.6M. If you use total dividends in the formula then you get total market value. (If you prefer then use the dividend per share in the formula and you will get the market value per share.)