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Market price of shares and dividend yield

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Market price of shares and dividend yield

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • October 25, 2013 at 5:51 pm #143699
    Nizar
    Member
    • Topics: 49
    • Replies: 125
    • ☆☆

    If the question stated that the dividend per share is $0.32, earning per share is $0.64 and the dividend growth is 5%. Cost of capital is 12%. how do we calculate the market price of the share. i can’t find the formula in the BPP Textbooks.

    and does difference in cost of capital and growth in dividend represent the dividend yield?

    October 25, 2013 at 6:41 pm #143704
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You can use the dividend growth formula – it should be in the BPP book, because it is on the formula sheet that you get given in the exam!

    The formula is that Po = Do(1+g)/(Re-g)

    Dividend yield is latest dividend divided by market value (as a percentage). It does not relate to the cost of capital (although it does ignore the potential growth in dividends).

    October 26, 2013 at 6:43 am #143724
    Nizar
    Member
    • Topics: 49
    • Replies: 125
    • ☆☆

    alright. thank you sir. 🙂

    October 28, 2013 at 6:25 pm #143975
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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