Answer:
P5
Explanation:
The value of the stock today is the present value of all the expected cash-flows that are likely to accrue to the investor who buys the share today. If an investor buys the share today, he is likely to receive D1, D2, D3, D4, D5 and in addition, using the going concern concept, the investor is also expected to receive all the dividends from D6 till infinity. The present value of the dividends D5 till infinity is equal to P5.
Imagine an investor who wants to buy the share at the end of year 5. He would value the share at that point by calculating the present value of all his expected cashflows, which would be the present value of D6, D7, D8 etc till infinity. Given a constant growth grate, the Gordon Growth Constant model can be used to find P5 as follows:
[tex]P5=\frac{D6}{ke-g}[/tex]
where D6 = D5(1+g)
therefore
[tex]P5=\frac{0.3(1+0.035)}{ke-0.035}[/tex]
D. P5
In calculating the constant growth P5 can use the following calculation:
[tex]P5 = \frac{D6}{ke-g}[/tex]
where D6 = D5(1+g)
then,
[tex]P5 = \frac{0.3(1+0.035)}{ke-0.035}[/tex]
By calculating the value of the fifth year the company can anticipate the value of dividends for the next 5 years.
To calculate stock dividends, there are some data that you need to know about:
Dividends are the share of profits or income of a company determined by the directors (and authorized by the GMS) to be distributed to shareholders. The payment is arranged based on the provisions that apply to the types of shares that exist.
Example:
A company (A) has 10,000 shares printing net profits of $ 1,600,000. The company dividend distribution policy (DPR) is 40% of net income distributed as dividends. Thus we can calculate dividends as follows:
Dividends = Net income x DPR = $ 1,600,000 x 40% = $ 640,000
Dividends per share = Dividends / outstanding shares = $ 640,000 / 10,000 = $ 64 per share
Another understanding of dividends is the right of shareholders (common stock), to get a share of the company's profits. If the company decides to share profits in the form of dividends, all shareholders get the same rights. However, the distribution of dividends to preferred shareholders takes precedence over the distribution of dividends from ordinary shareholders.
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Details
Class: High School
Subject: Business
Keywords: value, dividends, stock
