Q.1 Considering the following information, what is the price of the share as per Gordon’s Model?
Details of the Company
Answer :
Solution:
Gordon formula of P =
Where P is the price of the share,
E is Earnings per share,
b is Retention ratio,
(1 — b) is dividend payout ratio,
Ke is cost of equity capital,
br is growth rate in the rate of return on investment
Earnings per share, E = (Net profit after tax − Preference dividend) / No. of equity shares
