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prey co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › prey co

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • May 24, 2022 at 3:19 am #656297
    AFNAAAN
    Participant
    • Topics: 36
    • Replies: 23
    • ☆☆

    Prey Co – Summary statements of financial position
    $000s
    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?

    May 24, 2022 at 1:02 pm #656327
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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.

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