Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. question 3 a) the shares of sad plc are trading at

Question 3 a) The shares of SAD plc are trading at 210p and the company's...

70.2K

Verified Solution

Question

Finance

image
Question 3 a) The shares of SAD plc are trading at 210p and the company's dividends are expected to grow at 5 per cent indefinitely into the future. If the required rate of return on the company's shares is 15 per cent, and the share price can be explained by the constant rate of growth of dividends model, determine the dividend expected in the next time period. (8 marks) b) If the company finances all of its investments from retentions and the company pays out 75 per cent of its earnings as dividends how much of the share price of SAD can be attributed to the future growth prospects of the company and how much to its existing assets ? (10 marks) c) Explain what determines that rate of growth of dividends according to the constant rate of growth of dividends model. (3 marks) d) Explain what is meant by a price earnings ratio and discuss its primary determinants. The January 2021 12 month trailing price earnings ratio of Netflix is 91.51 while that of Goldman Sachs is 10.02. Try to analyse this difference in the context of the primary determinants. (12 1/3 marks) (TOTAL 33 1/3 MARKS)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students