The current market price of a company’s share is Rs. 90 and the expected dividend per share next year…
According to Gordon's Constant Growth Dividend Valuation Model, the shareholders' required rate of return (cost of equity, Ke) is given by Ke = (D₁ / P₀) + g. Substituting…
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The current market price of a company’s share is Rs. 90 and the expected dividend per share next year is Rs. 4.50. If the dividends are expected to grow at a constant rate of 8%, the shareholders required rate of return is:
Answer and explanation
Correct answer C
According to Gordon's Constant Growth Dividend Valuation Model, the shareholders' required rate of return (cost of equity, Ke) is given by Ke = (D₁ / P₀) + g. Substituting the given values: Ke = (4.50 / 90) + 0.08 = 0.05 + 0.08 = 0.13, or 13%.
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UGC NET Commerce