Practise question share value

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November 27, 2015 at 3:38 pm #285746
gonko
Participant
- Topics: 11
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Hi All

Dividends in recent years
2010 31.1
2011 32.8
2012 33.8
2013 36.0

Dividend for 2013 has just been paid and cost of equity is 12%.

My working

36.0/31.1 and cube root the answer. Take away 1 gives a growth average of 3.725%.

Then
0.36(1.03725)/(.12-.03725) = $4.51 approx.

Answer is $5.40.

Please help!

Thank you all.
November 27, 2015 at 3:53 pm #285750
John Moffat
Keymaster
- Topics: 57
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The cube root of 36.0 / 31.1 is 1.05.
Subtract 1 and you get 0.05 or 5%

$5.40 is the correct answer!
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