Mcq

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February 4, 2018 at 1:12 pm #435043
imran5556
Participant
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209 ELW Co recently paid a dividend of $0.50 a share. This is $0.10 more than 3 years ago. Shareholders have a
required rate of return of 10%.
Using the dividend valuation model and assuming recent dividend growth is expected to continue, what
is the current value of a share?
A $23.41
B $5.00
C $38.48
D $10.48

Sir why they have deducted the (0.50-0.10), to calculate the growth
February 5, 2018 at 12:15 pm #435254
John Moffat
Keymaster
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If the recent dividend in 0.50, and this is 0.10 more than it was 3 years ago, then it means 3 years ago it was less by 0.10 and was therefore 0.40.
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