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Hi,can help me with this?
a company has just paid an ordinary share dividend of 32.0 cents and is expected to pay a dividend of 33.6 cents in one years time. the cost of equity is 13% what is the market value on ex dividend basis? answer= 4.20
i had tried but didn’t get it, please help, thanks in advance.You use the dividend valuation formula that is given on the formula sheet.
The growth rate = (33.6 – 32.0) / 32.0 = 0.05 (or 5%)
Therefore using the formula, the market value = (32.0 x 1.05) / (0.13 – 0.05) = 420
I really do suggest that you watch out free lectures – they are a complete course for Paper F9 and cover everything you need to be able to pass the exam well.
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