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Sir ,it might be very silly thing to ask but still want to make doubt clear. We say with debt debt holder ask for less return ,as they get interest every year and they are.For equity they require more return as they get only dividend depending on profit. Then what is this required rate of return by share holder, do they get anything else apart from dividend and the rise or fall in share price.I mean if they say required rate of return by shareholder is 15 % then does it mean they get that 15% every year.
ThanksYes and no 🙂
The required return is determined by a combination of general interest rates and the level of risk in the same – the more risky the high the return they require.
However, they get that return by changing the market value of the share – it is shareholders who determine the market value and it is the present value of expected future dividends discounted at their required return. As expectations of dividends go up and down, so to will the market value of the share.
It will help you to watch the free lectures on this (together with the free lecture notes that go with them) where I explain, together with examples.
Thank you sir. One more thing i want to ask actually i am preparing for p4, so which all lecture from f9,should i go through. Thanks
All of them are relevant and worth going through except maybe for the chapters on the management of working capital which is not examined directly at P4.
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