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An investor is considering investing into the shares of a start-up company. The investor's approach to share valuation is to discount future expected dividends at a rat of 5.0% per annum. The company is an online food delivery service that is expected to start paying annual dividends of 6p per share in 3 years' time. Dividends are expected to remain constant for 5 years and then start increasing at a rate of 3.5% per year. (a) Show that a fair price for the company's shares is approximately £3 per share.

An investor is considering investing into the shares of a start-up company. The investor's approach to share valuation is to discount future expected dividends at a rat of 5.0% per annum. The company is an online food delivery service that is expected to start paying annual dividends of 6p per share in 3 years' time. Dividends are expected to remain constant for 5 years and then start increasing at a rate of 3.5% per year. (a) Show that a fair price for the company's shares is approximately £3 per share.

Advanced Engineering Mathematics
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Can i have a worked example please. Thanks!

An investor is considering investing into the shares of a start-up company. The investor's approach to share valuation is to discount future expected dividends at a rate of 5.0% per annum. The company is an online food delivery service that is expected to start paying annual dividends of 6p per share in 3 years' time. Dividends are expected to remain constant for 5 years and then start increasing at a rate of 3.5% per year. (a) Show that a fair price for the company's shares is approximately £3 per share.
Transcribed Image Text:An investor is considering investing into the shares of a start-up company. The investor's approach to share valuation is to discount future expected dividends at a rate of 5.0% per annum. The company is an online food delivery service that is expected to start paying annual dividends of 6p per share in 3 years' time. Dividends are expected to remain constant for 5 years and then start increasing at a rate of 3.5% per year. (a) Show that a fair price for the company's shares is approximately £3 per share.
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