- 10 Marks
FM – March 2023 – L2 – Q1b – Discounted cash flow | Dividend Policy
Calculate the value of a share for Oliso Ghana Ltd using projected dividend growth rates and the total value for an investor holding 1,500 shares.
Question
Oliso Ghana Ltd paid a dividend of GH¢120 per share two years ago. In the previous and current year, dividend grew by 10% per annum. Starting from next year, dividend is projected to grow by 15% for the next three years and then 10% for another three years and finally settling at 12% forever. The investors expect 20% returns.
Required:
i) Calculate the value of a share in cedis for Oliso Ghana Ltd. (8 marks)
ii) If an investor holds 1,500 shares of the company, what will be the total value in cedis? (2 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Discounted Cash Flow, Dividend valuation, Growth rates, Stock valuation
- Level: Level 2
- Topic: Discounted cash flow, Dividend Policy
- Series: MAR 2023
