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This is a part of Sec C ques ‘calculate MV of WACC’ of the SEPT/DEC 2023 paper.
The dividend for 20X8 of $0.84 per share is due to be paid shortly. Marble Co has in issue, 226 million ordinary shares with a nominal value of $0.50 per share and a current cum dividend share price of $11.93 per share.
Isn’t the MV of this share calculated like this :
(226m/0.5 nominal value ) * (11.93-0.5) ex div share price = 5,012.68 mThe mark scheme has calculated it like :
Ordinary shares 226m x 11·09 =2,506·34
I don’t understand why they are not dividng the ordinary shares by the nominal value before multiplying it by the ex div share price , since all the questions I’ve done before calculated the MV just like how I did
Is it because the question say’s that ordinary shares are in “ISSUE” with the nominal value ?
Is that why we don’t divide it by the nominal value since it’s aleady in nominal terms because it’s an ISSUE of 226m ?The market value of a share is typically calculated by multiplying the number of shares by the ex-dividend share price.
However, they have multiplied the number of ordinary shares (226 million) by the cum dividend share price ($11.09) instead of the ex-dividend share price.
You are right, this is because the question specifically mentions that the ordinary shares are “in issue” with a nominal value of $0.50 per share.
It’s important to carefully read the question and follow the instructions provided in order to arrive at the correct answer. It would be marked accordingly as an OFR anyway as a section C question.
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