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Dear Sir,
TKQ Co has just paid a dividend of 21 cents per share and its share price one year ago was $3·10 per share. The total shareholder return for the year was 19·7%.
What is the current share price?
A $3·50
B $3·71
C $3·31
D $3·35If I use the formula of total shareholder wealth I can’t get the right answer, in mark scheme the answer is stated as
3.10 * 1.197 = 3.710 – 0.21 = $ 3.5
So why did we use this approach? is it because we need to cancel dividend to derive ex – div share price?
Regards
The return over the year = (dividend + increase in share price) / MV at start of year
TKQ Co has just paid a dividend of 21 cents per share and its share price one year ago was $3·10 per share. The total shareholder return for the year was 19·7%.
What is the current share price = $3·50
That is share price a year ago 3.10 * 1.197 (TSR) = 3.710 – 0.21 = $ 3.5
CAPITAL GAIN OR LOSS = CURRENT SP – SHARE PRICE AT BEGIN OF YR
TSR = [DIV + CAPITAL GAIN OR LOSS] / SHARE PRICE AT BEGIN YEAR * 100
19.7% = 21 + ? / 3.10
3.10 * 1.197 – 21
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