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

1 what is the traditional cash equivalency approach used to

1. What is the traditional cash equivalency approach used to determine how below-market-rate loans affect value? 2. How can the effect of below-market-rate loans on value be determined using investor criteria? 3. ARGUS. ...

1 why is variance reduction important to logistical

1. Why is variance reduction important to logistical integration? Illustrate in terms of logistical operations. 2. What is the meaning of the phrase cradle-to-cradle logistics? Discuss the operational differences of orig ...

Use the attached document reply format to answer the

Use the attached document (Reply Format) to answer the information below: Brief Description: McDonald's is the world's leading global food service retailer with over 36,000 locations in over 100 countries. More than 80% ...

Ai enterprises is a computer corporation and its present

AI Enterprises is a computer corporation and its present sources of funds are $20,000,000 in equity capital and $8,000,000 in preferred stock. The company wants to fund some of its future projects (estimated cost: $12,00 ...

Questions1 calculate the value of a bond with pound100 face

Questions: 1) Calculate the value of a bond with £100 face value, 5 years to maturity, coupon rate of 7% p.a. paid annually, when the discount rate (expected rate of return on similar instruments) is 4% p.a. 2) Calculate ...

1 why do researchers care how much variability exists in a

1. Why do researchers care how much variability exists in a set of data? 2. Distinguish between descriptive and inferential statistics. 3. Conceptually, what does the variance tell us about a set of data?

Why do individual bolts relax a bit when first tightened

Why do individual bolts relax a bit when first tightened? Name several factors that can increase the relaxation ? Which will tend to loose more preload after initial tightening, a short bolt or a long bolt? 8. What are t ...

Assessment taskquestion 1 chapter 1 the asian financial

Assessment Task: Question 1: (chapter 1): The Asian financial crisis provided some valuable lessons about nation-state and global financial system. What are some of those lessons? List at least 3 reasons. Explain each of ...

A project has the following incremental cash flows for

A project has the following incremental cash flows for years zero through year 5, respectively: -$2,500, $800, $600, $700, $400 and $300. If the firm's cost of capital is 8%, according to the IRR decision rule, should th ...

1 why do researchers calculate the coefficient of

1. Why do researchers calculate the coefficient of determination? 2. What does a coefficient of determination of .40 indicate?

  • 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

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen