Use the Gordon Growth Model to estimate the cost of the ordinary shares (expressed as a percentage to two decimal places) from the information provided attached. INFORMATIONThe market value of a Fitch Limited ordinary share is R60. The dividend at the end of the previous year wasR9 and the expected growth rate in dividends is 10% p.a.

Given information: Current Dividend (D0) = R9 Expected constant growth rate (g) = 10% or 0.10 Market…

Answered: INFORMATION The market value of a Fitch…

INFORMATION The market value of a Fitch Limited ordinary share is R60. The dividend at the end of the previous year was R9 and the expected growth rate in dividends is 10% p.a.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Use the Gordon Growth Model to estimate the cost of the ordinary shares (expressed as a percentage to two decimal places) from the information provided attached.

INFORMATION
The market value of a Fitch Limited ordinary share is R60. The dividend at the end of the previous year was
R9 and the expected growth rate in dividends is 10% p.a.

Definition Definition Model used for valuation of company stock based on the future dividend payments that increase at a constant growth rate. Value of the stock is the present value of this future dividend payments at a given required rate of return.

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