An ordinary share currently pays a dividend of R2 for the year. Expected dividend growth is 20% for the next three years and then growth is revert to 7% thereafter for an indefinite amount of time. The appropriate required rate of return is 15%. What is the ordinary share's value?

An ordinary share currently pays a dividend of R2 for the year. Expected dividend growth is 20% for the next three years and then growth is revert to 7% thereafter for an indefinite amount of time. The appropriate required rate of return is 15%. What is the ordinary share's value?

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

Ys
Value f share
of
7x4.35
3D30.45
OND
R2
2 x l.20
- Ro.40
%3D
%3D
DIN2
Divz 2.40 X1.20 = R2.88
3.46
DIV3= 2.88 x 1. 20

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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