m1 Dividend
m1 Dividend
m1 Dividend
to tell u that a company whose payout ratito is greater than ke, the value of share decreases. Whenever payout ratio is higher the share p
E 10 10 10 10 10 10
ke/rate of capitalization 15% 15% 15% 15% 15% 15%
rate of return>ke
according to walter model, expected price is highest when dividend payout ratio is lowest
P 120
P=(D+(E-D)*r/ke)/ke
P 45.83333
rate of return>ke
according to walter model, expected price is highes when dividend payour ratio is lowest
P 52.08333
P=(D+(E-D)*r/ke)/ke
NPAT 3000000
PREFERENCE 1200000 12% of 100 lak
NP available to equity 1800000
No of equity shares 300000
eps 6
dps
P 42
r 20%
ke 16%
42=(D+(6-D)*20%/16%)/16%
D 3.12
PAYOUT 52.00%
P=DO(1+G)/Ke-g
Growth rate= r*RETENTION RATIO
ke 15%
fv 10
g 2%
D 20%
DPS 2
P 15.69231
P=DO(1+G)/Ke-g
Growth ratr*RETENTION RATIO
g 5% 3% 8%
D
DPS 2 2 2
P 20 16.48 28.8
P=DO(1+G)/Ke-g
Growth rate= r*RETENTION RATIO
E 11.04
ke 9.20% rf+B(Rm-Rf)
fv
risk free rate 6%
g 6%
D
beta 0.8
DPS 6
market risk premium (rm-rf) 4%
P
P=(D+(E-D)*r/ke)/ke
current price 90
expected eps 18
div payout 60%
Expected DPS(D) 10.8
ke 10%
90=(10.8+((18-10.8)*0.20/KE))/KE
90KE=10.8+(7.2)*0.2/KE
90*KE=10.8+1.44/KE
90*KE^2=10.8KE+1.44
90*KE^2-10.8KE-1.44=0
KE=20%
dividend per share (D1) 6 SITUATION 1= IF DIVIDEND IS DECLARED
price per share(P0) 100 P0=(D1+P1)/(1+KE)
KE 10% 100=(6+P1)/(1+0.1)
100*1.10=(6+P1)
110-6=P1
P1 104
VERIFICATION
EARNING 1000000
LESS DIVIDEND 600000
RETAINED 400000
INVESTMENT TARGET 2000000
FRESH ISSUE 1600000
EXPECTED PRICE 104
NUMBER OF SHARES ISSUED 15384.6154
ORIGINAL NO OF SHARES 100000
TOTAL NUMBER OF SHARES 115384.615
EXPECTED PRICE 104
VALUE OF COMPANY 120000000 1109.467
D IS DECLARED SITUATION 2 - IF DIVIDEND IS NOT DECLARED
P0=(D1+P1)/(1+KE)
100=(0+P1)/(1+0.1)
100*1.10=(6+P1)
110-0=P1
P1 110
EARNING 1000000
LESS DIVIDEND 0
RETAINED 1000000
INVESTMENT TARGET 2000000
FRESH ISSUE 1000000
EXPECTED PRICE 110
NUMBER OF SHARES ISSUED 9090.90909090909
ORIGINAL NO OF SHARES 100000
TOTAL NUMBER OF SHARES 109090.909090909
EXPECTED PRICE 110
VALUE OF COMPANY 120000000 991.7355
P0 100 SITUATIONIF DIVIDEND IS DECLARED
KE 10% P0=(D1+P1)/(1+KE)
DPS 5 100=(5+P1)/(1+0.1)
100*1.10=(5+P1)
110-5=P1
P1 105
VERIFICATION
EARNING 500000
LESS DIVIDEND 250000
RETAINED 250000
INVESTMENT TARGET 1000000
FRESH ISSUE 750000
EXPECTED PRICE 105
NUMBER OF SHARES ISSUED 7142.8571429
ORIGINAL NO OF SHARES 50000
TOTAL NUMBER OF SHARES 57142.857143
EXPECTED PRICE 105
VALUE OF COMPANY 6000000 544.2177
SITUATION 2 - IF DIVIDEND IS NOT DECLARED
P0=(D1+P1)/(1+KE)
100=(0+P1)/(1+0.1)
100*1.10=(6+P1)
110-0=P1
P1 110
VERIFICATION
EARNING 500000
LESS DIVIDEND 0
RETAINED 500000
INVESTMENT TARGET 1000000
FRESH ISSUE 500000
EXPECTED PRICE 110
NUMBER OF SHARES ISSUED 4545.455
ORIGINAL NO OF SHARES 50000
TOTAL NUMBER OF SHARES 54545.45
EXPECTED PRICE 110
VALUE OF COMPANY 6000000 495.8678
P0 100 SITUATIONIF DIVIDEND IS DECLARED
KE 10% P0=(D1+P1)/(1+KE)
DPS 5 100=(5+P1)/(1+0.1)
100*1.10=(5+P1)
110-5=P1
P1 105
VERIFICATION
EARNING 250000
LESS DIVIDEND 125000
RETAINED 125000
INVESTMENT TARGET 1000000
FRESH ISSUE 375000
EXPECTED PRICE 105
NUMBER OF SHARES ISSUED 3571.429
ORIGINAL NO OF SHARES 25000
TOTAL NUMBER OF SHARES 28571.43
EXPECTED PRICE 105
VALUE OF COMPANY 3000000 272.1088
SITUATION 2 - IF DIVIDEND IS NOT DECLARED
P0=(D1+P1)/(1+KE)
100=(0+P1)/(1+0.1)
100*1.10=(6+P1)
110-0=P1
P1 110
VERIFICATION
EARNING 250000
LESS DIVIDEND 0
RETAINED 250000
INVESTMENT TARGET 1000000
FRESH ISSUE 250000
EXPECTED PRICE 110
NUMBER OF SHARES ISSUED 2272.727
ORIGINAL NO OF SHARES 25000
TOTAL NUMBER OF SHARES 27272.73
EXPECTED PRICE 110
VALUE OF COMPANY 3000000 247.9339
Equity share capital 1000000
Face value per sharw 10
number of shares 100000
bonus shares 1:02
no of bonus 50000
face value of bonus 500000
liabilities amt assets amt
Equity share capital of 10 each 1500000 Fixed asset 1600000
General Reserve(1500000-1000000) 1000000 Current ass 900000
debt
720000
1500000
equity
480000
NP