- This topic has 1 reply, 2 voices, and was last updated 8 months ago by .
- You must be logged in to reply to this topic.
Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
Prey Co – Summary statements of financial position
2001 2 3 4 5 6
Profit after tax (10) 20 60 130 140 156
Dividends paid – 10 30 65 70 78
What growth rate should be used if estimating the value of Prey Co using the
dividend valuation model? Give your answer as a percentage to 1 dp.
answer: The best indicator of future growth can be calculated using years 20X4 to 20X6 (20X3
was a transition year and the impact of the boost in demand was only partially seen).
the have taken geomatric rate from 4 -6 (reason given above) but actually v shud take from 1 -6 ryt?
and if similar question is given fro exam, how will we know from which figure v have to take?
We are always using past growth as an estimate of future growth. Since something obviously happened in 20X4 which made the profit and the dividend increase a lot then the growth rate since then is surely the best basis to use as an estimate of the likely future growth.