- This topic has 6 replies, 2 voices, and was last updated 5 years ago by
.
- Posts
Sir i am.not clear with part 4 which asks issues about proposed methods of financing project can u please give me short summaries of each of the four paragraphs given in answer would be thankful to u sir plz
You will have to say which of the paragraphs you are not clear about (because they are all dealt with in my free lectures).
Yes i saw ur lecture and dividend irrelevance theory is much clear now but i dont understand this part that corporate dividend policy attracts certain clientele due to personal tax reasons for eg high rate tax payers may prefer low dividend payouts and lower rate tax payers may prefer high dividend payouts please explain this
Please also explain part c how the value of the project is found if large project is undertaken
Low dividends mean more profits are retained which will lead to higher capital growth. High dividends mean less profits are retained which will lead to lower capital growth.
The tax treatment of dividend income is different from the tax treatment of capital gains, and so shareholders with different incomes will have different wishes with regards to whether they prefer income or capital gains.
There is no part (c) in the original exam question! It only has parts (a) and (b).
Sorry john i was talking about part b( iii) i how they have calculated the value of project if new project is undertaken i cannot understand how they calculated $5.04 per share or $403 market capitalization
The MV is, as always, the present value of the future dividends discounted at the shareholders required rate of return of 12%.
We know what the dividends are expected to be for the next 3 years. For the following years, when the dividends are growing, we use the dividend valuation formula as explained in my lectures.
- You must be logged in to reply to this topic.