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Calculate The Share Price Of A Company That Pays Dividend Lower Than The Expected Rate

Question

Calculate the share price of a company the pays a fixed dividend of £2.30 pa when the required rate of return demanded by equity investors is 3%. What will the price be if investors demand 12% to hold these same shares? What will be the price if investors demand 3% to hold these same shares? What will the share price be under all three scenarios if dividends grow by a rate of 1.5% pa?

 

Summary

The question belongs to Finance and it discusses about calculating the share price of a company that pays a fixed dividend which is lower than the expected dividend rate.

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    Giuseppe

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