Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Earnings per share for 2010 had been 22.8 pence, and Andrew Osborne expects this to increase to 25 pence per share for 2011. He states that this increase in earnings per share is in line with market expectations of the company's performance. The pattern of recent dividends, which are paid each year on 31 December, is as follows:

Year 2010 2009 2008 2007 2006 2005
Dividend per share (pence) 11.4; 11.1; 9.6; 9.6; 9.2; 8.5

Sir Royston Fairchild, the managing director, proposes that 70 per cent of the earnings in 2010 and subsequent years should be retained for investment in new product development. It is expected that, if this proposal is accepted, the dividend growth rate will be 8.75 per cent. Sir Royston Fairchild had remembered reading an article in the Financial Times that dividends are irrelevant to the share price of a company.

Required: find out the share price in the following circumstances:

(a) The company decides not to change its current dividend policy.
(b) The company decides to change its dividend policy as proposed by the Managing Director.

Discount rate: WACC=10.28%

I'm mostly concerned with part (b), however, please provide the calculations of both parts to be sure I'm on the right track.

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M928106

Have any Question? 


Related Questions in Basic Finance

Financial statement analysisthe following information

Financial Statement Analysis The following information relates to Harris Corporation. Account Current year Prior year Net sales (all credit) $520,125 $499,500 Cost of goods sold $375,960 $353,600 Gross profit $144,165 $1 ...

Your company doesnt face any taxes and has 769 million in

Your company doesn't face any taxes and has $769 million in assets, currently financed entirely with equity. Equity is worth $51.90 per share, and book value of equity is equal to market value of equity. Also, let's assu ...

Assume that after you graduate you get a job as the chief

Assume that after you graduate, you get a job as the chief financial officer of a small company. Explain why being able to forecast the direction of interest rate changes may be critical for your success in that position ...

Homework set2015 strayer university all rights reserved

Homework Set 2015 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or ...

The balance after 11 months including interest on a loan at

The balance after 11 months, including interest, on a loan at 9.6% is 15,558.40. What are the principal and interest components of the balance? Round your final answers 2 decimal places.

What are the factors that determine the spread between

What are the factors that determine the spread between agency securities and Treasuries? If agency and Treasury securities are perceived to have the same risk, why may there still be a positive spread between their price ...

Time value of moneywhen the genesis energy and sensible

Time Value of Money When the Genesis Energy and Sensible Essential teams held their weekly meeting, the time value of money and its applicability yielded an extremely stimulating discussion. However, most of the team mem ...

Lambda corporation has current liabilities of 430000 a

Lambda Corporation has current liabilities of $430,000, a quick ratio of 1.7, inventory turnover of 4.9, and a current ratio of 3.4. What is the cost of goods sold for Lambda Corporation?

Question 1the following numbers are extracted from the

Question 1 The following numbers are extracted from the annual report of Omega Limited (in millions of dollars).   Fiscal 2015 Fiscal 2014 Total assets 19,042 18,184 Total liabilities 12,826 12,865 Total revenues 13,652 ...

Regarding anovaexplain the difference between the

Regarding ANOVA: Explain the difference between the "Between-Treatments Estimate of Variance and the Within-Treatments Estimate of Variance. Why do we need two estimates? Wouldn't one estimate suffice?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate