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In Kaplan, In One Of The Points They Have Written : Shares Are Fairly Priced – the purchase is a zero NPV transaction. Shares are priced to give investors the exact written to reward them for the level of systematic risk in their shares. As a result the purchase of shares is a zero NPV transaction because the price paid for the share is an accurate reflection of its worth.
Isn’t This Statement Wrong? This stands true for debtholders. But Shareholders require a premium above their investment. Right?
The statement is completely correct.
The market value of a share is the present value of the future expected dividends discounted at the shareholders required rate of return, and the required rate of return is determined (under CAPM) by the systematic risk of the shares.
You must watch my free lectures because I explain all of this in the lectures, and you cannot expect me to type them all out here 🙂
The lectures are a complete free course and cover everything needed to be able to pass the exam well. The only extra book you need (other than our free lecture notes) is a Revision Kit from one of the ACCA approved publishers, because question practice is vital to passing the exam.
Sir, I Have Watched All Your Lectures 🙂 While Revising I Came To This Point.
Thanks A Lot For Help!
I Am Really Sorry For Disturbing 🙂
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