(d) Calculate the ex pidend share price predicted by the pidend growth model and discuss the company’s
view that share price growth of at least 8% per year would result from expanding into the retail camera
market. Assume a cost of equity capital of 11% per year. (6 marks)
正确答案：
(d)Thedividendgrowthmodelcalculatestheexdivsharepricefromknowledgeofthecostofequitycapitaltheexpectedgrowth
rateindividendsandthecurrentdividendpershare(ornextyear’sdividendpershare)Usingtheformulagiveninthe
formulaesheetthedividendgrowthrateexpectedbythecompanyof8%peryearandthedecreaseddividendof7·5pper
share:
Shareprice=(7·5×1·08)\/(0·11–0·08)=270por￡2·70
Thisisthesameasthesharepricepriortotheannouncement(￡2·70)andsoifdividendgrowthof8%peryearisachieved
thedividendgrowthmodelforecastszerosharepricegrowthThesharepricegrowthclaimmadebythecompanyregarding
expansionintotheretailcameramarketcannotthereforebesubstantiated
Infactalowerfuturesharepriceof￡2·49waspredictedbyapplyingthecurrentprice-earningsratiototheearningsper
shareresultingfromtheproposedexpansionIfthisestimateiscorrectafallinsharepriceof7%canbeexpected
Thesharepricepredictedbythedividendgrowthmodelof￡2·70wouldrequireanafter-taxreturnontheproposedexpansion
of11·66%whichismorethanthe9%predictedbytheBoardThecurrentreturnonshareholders’fundsis7·5%(4·5\/60)
butin2005itwas12·8%(7·3\/57)so11·66%maybeachievablebutlooksunlikely
Sincethemarketpricefellfrom￡2·70to￡2·45followingtheannouncementitappearsthatthemarketdoesnotbelieve
thattheforecastdividendgrowthcanbeachieved
