Planet has just announced an ordinary dividend per share of 20p. The past four years’ dividends per share have been 13p, 14p, 17p and 18p (most recent dividend last) and shareholders require a return of 14 per cent. What is a fair price for Planet’s shares? (b) Planet now decides to increase its debt level, thereby increasing the financial risk associated with its equity shares. As a consequence, Planet’s shareholders increase their required rate of return to 15.4 per cent. Calculate a new price for Planet’s shares. (c) Outline any problems with using the dividend growth model as a way of valuing shares.
Planet has just announced an ordinary dividend per share of 20p. The past four years’ dividends per share have been 13p, 14p, 17p and 18p (most recent dividend last) and shareholders require a return of 14 per cent. What is a fair price for Planet’s shares?
(b) Planet now decides to increase its debt level, thereby increasing the financial risk associated with its equity shares. As a consequence, Planet’s shareholders increase their required
(c) Outline any problems with using the dividend growth model as a way of valuing shares.
Step by step
Solved in 2 steps with 2 images
Just a quick question for this answer.
Isnt N supposed to be 4 years and not 5?
As the growth is from 13 to 14,14 to 17,17 to 18 and 18 to 20.
In total 4.is something wrong?
by Bartleby Expert
