Example: What is the multi-year holding period return for this share Initial share price was £1, (P3) was £1.20 A dividend of 6p was paid at the end of Year 1 (D₁), 7p was paid at the end of Year 2 (D₂) and 8p was paid at the end of Year 3 (D3) Cash flow (pence) - Year 0 1 2 3 3 NPV (100) 6 7 8 120 DF @ 12% DCF DF @13% DCF
Example: What is the multi-year holding period return for this share Initial share price was £1, (P3) was £1.20 A dividend of 6p was paid at the end of Year 1 (D₁), 7p was paid at the end of Year 2 (D₂) and 8p was paid at the end of Year 3 (D3) Cash flow (pence) - Year 0 1 2 3 3 NPV (100) 6 7 8 120 DF @ 12% DCF DF @13% DCF
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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Transcribed Image Text:Example:
What is the multi-year holding period return for this share
- Initial share price was £1, (P3) was £1.20
A dividend of 6p was paid at the end of Year 1 (D₁), 7p was paid at the
end of Year 2 (D₂) and 8p was paid at the end of Year 3 (D3)
●
Year
0
1
2
3
3
NPV
Cash flow (pence)
(100)
6
7
8
120
DF @
12%
DCF
DF @13%
DCF
Expert Solution
Step 1
Formula for Holding Period Return=
P0= Initial value
P1= End of period value
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