As an investor in the equity market you become aware of investment opportunity in 3 corporates. Assuming that the cost of equity is 8%, compute the fair value of X Limited, Y Limited and Z Limited using the Dividend discount model. a. Given the history of the company, X Limited is expected to pay a uniform dividend of Rs. 5.00 per share. b. Being in the IT Industry, Y Limited is expected to pay a dividend of Rs. 4.00 per share and an increase of 5% year on year thereafter. c. A pharmaceutical company, Z Limited has been paying a dividend of Rs. 2.00 over for the last 3 years. The company is expected to do extremely well and increase the dividend pay-out by 7% year on year. This year the dividend expected is Rs. 8.00. Additionally, what is the biggest lacuna in the Dividend Discount Model in valuing stocks? Give an example to explain
As an investor in the equity market you become aware of investment opportunity in 3
corporates. Assuming that the
Y Limited and Z Limited using the
a. Given the history of the company, X Limited is expected to pay a uniform dividend of Rs. 5.00 per share.
b. Being in the IT Industry, Y Limited is expected to pay a dividend of Rs. 4.00 per share
and an increase of 5% year on year thereafter.
c. A pharmaceutical company, Z Limited has been paying a dividend of Rs. 2.00 over for
the last 3 years. The company is expected to do extremely well and increase the dividend
pay-out by 7% year on year. This year the dividend expected is Rs. 8.00.
Additionally, what is the biggest lacuna in the Dividend Discount Model in valuing
stocks? Give an example to explain
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