42. Which of the two companies gives a better investment: company A with a current market value ofP3.55 and P0.72 dividend or company BSoľn:with a current market value of P53.20 anda dividend of P7.32?A. company AB. company BC. both A and BD. none of them

Dividend yield- The dividend yield or dividend price ratio of a share is the dividend per share…

2. Which of the two companies gives a better investment: company A with a current market value of P3.55 and P0.72 dividend or company B with a current market value of P53.20 and a dividend of P7.32? A. company A B. company B Soln: C. both A and B D. none of them

2. Which of the two companies gives a better investment: company A with a current market value of P3.55 and P0.72 dividend or company B with a current market value of P53.20 and a dividend of P7.32? A. company A B. company B Soln: C. both A and B D. none of them

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

42. Which of the two companies gives a better investment: company A with a current market value of
P3.55 and P0.72 dividend or company B
Soľn:
with a current market value of P53.20 and
a dividend of P7.32?
A. company A
B. company B
C. both A and B
D. none of them

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We are to choose the dividend payment policy in the company in such a way as to maintain the current market value (price) of the company. There are two dividend payment models to choose from: fixed dividend and the Gordon model. Please indicate how much (in percentage points) should the nearest fixed dividend be higher than the nearest dividend paid according to the Gordon model, if we assume that the increase in profits of the company (to be distributed among shareholders) will be at the level of 1.5% each year and we assume that the discount rate in this market will be 7%. Calculate the fixed dividend if the nearest dividend according to the Gordon model is 10 PLN. В I
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