1) | It is called as | Interest paid to bank | Dividend paid to shareholders |
Need profit? | No | Yes | |
Compulsory? | Yes | No | |
Tax | Yes | No | |
[Deductibility] | |||
2) | |||
a) | Share price as per constant dividend growth model = D1/(r-g) | ||
where, | |||
D1 = Next expected dividend | |||
r = Required return | |||
g = Growth rate in dividend | |||
So current price of the share = 10/(8%-5%) | $ 333.33 | ||
b) | Yes, it is a good investment. The reason is that the market | ||
price is less than the intrinsic value of the share. That is the | |||
share is undervalued by the market. | |||
Buying it at $310 will realize higher returns. |
1 & 2 PLEASE 1. Please compare the dividend to shareholders and the interest paid to...
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9.2
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