kckinn (CA) (759 Points)
16 May 2013Hi,
I have a doubt in SFM.
We have this formula for calculating the price of a share in case of growth.
Po= D1 / K - g
(i.e. Dividend / Cost of equity - growth rate)
I observed in some questions Institute multiplies D with the (1+g) being the growth in dividend. And some times we dont even though growth rate is given in the question.
I am not sure when to Multiply D with (1+g) and when not to multiply.
Please someone clear my doubt.
Ashwani Narnoli
(.)
(1843 Points)
Replied 16 May 2013
D is multiplied with (1+g) if last years dividend is given because dividend should be future and not past
CA Dimple Thacker
(It's Never Too Late)
(506 Points)
Replied 16 May 2013
| Originally posted by : CA Ashwani Narnoli | ||
 |
D is multiplied with (1+g) if last years dividend is given because dividend should be future and not past |
|
Agree.
D1=D(1+g)
That's why if D1 is given in the sum than no need to multiply it by (1+g)
NIRAJA KUMAR PANDA
(Student)
(51 Points)
Replied 16 May 2013
Since D1 stands for dividend in year 1..................... it means in the next year of calculation.
if question says next year dividend/expected divident .......... in that case it will not be multiplied with (1 + growth rate)
rishi sharma
(article)
(21 Points)
Replied 16 May 2013
it depends upon information of question... if we assume the given dividend as dividend of last year then we have to multiply D(1+G) to find out dividend at the end of current year & if we assume or as per instruction of question given dividend is of current year ..then no need to multiply.. directly apply the formula to obtain present value to all future dividend
CAclubindia
