(i) Bean Bhd has just announced an ordinary dividend per share of RM20. The past four years’ dividends per share have been RM13, RM14, RM17 and RM18 (most recent dividend) and shareholders require a return of 14%. Calculate Bean Bhd share price. (ii) Bean Bhd now decides to increase its debt level, thereby increasing the financial risk associated with its equity shares. Bean’s shareholders consequently increase their required rate of return to 15.4%. Calculate the new price of Bean’s share. (iii) Discuss the impact of using the dividend growth model as a way of valuing shares.
(i) Bean Bhd has just announced an ordinary dividend per share of RM20. The past four years’ dividends per share have been RM13, RM14, RM17 and RM18 (most recent dividend) and shareholders require a return of 14%. Calculate Bean Bhd share price. (ii) Bean Bhd now decides to increase its debt level, thereby increasing the financial risk associated with its equity shares. Bean’s shareholders consequently increase their required rate of return to 15.4%. Calculate the new price of Bean’s share. (iii) Discuss the impact of using the dividend growth model as a way of valuing shares.
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 2
(a) Answer the following questions regarding Bean Bhd.
(i) Bean Bhd has just announced an ordinary dividend per share of RM20. The
past four years’ dividends per share have been RM13, RM14, RM17 and
RM18 (most recent dividend) and shareholders require a return of 14%.
Calculate Bean Bhd share price.
(ii) Bean Bhd now decides to increase its debt level, thereby increasing the
financial risk associated with its equity shares. Bean’s shareholders
consequently increase their required
new price of Bean’s share.
(iii) Discuss the impact of using the dividend growth model as a way of valuing
shares.
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