Case Study 4 - Equity Q4

mail2arungoel
Good Student
Posts: 29
Joined: Mon Apr 23, 2012 9:45 pm

Case Study 4 - Equity Q4

Postby mail2arungoel » Thu Apr 26, 2012 12:26 am

In the following Question, the expected growth is given at 5% whereas the answer takes the growth as 10% ?
Which of the following will be the fair value of IHCL two years down the line, when company earnings are expected to grow at a stable rate of 5%?
Choose one answer. a. Rs 46.33
b. Rs 26.27
c. Rs 36.67
.The correct answer is Rs 36.67

Average payout ratio = 36.1%
V2=[D1(1+g)]/(r-g)
=[6*36.1%*(1+10%)]/(16.5%-10%)=36.66

content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: Case Study 4 - Equity Q4

Postby content.pristine » Mon May 14, 2012 3:46 pm

Thanks for your post. This question has been corrected

8-)


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