Dividend Policy - 1

Dividend Policy – 1



third chapter on the list to get done with equity we are done with bonds I'm going to the next chapter that is known as a small chapter now dividend policy people at times you know argue that this chapter should not be done I am with all of them it should not be done see a final level Peter J chapter knew not cheer up Kalia chap th after at times our jatha chalma at McKinley so guys please don't leave the chapter or a cilium NSF near division maybe recur in fact muted photos of Bookman arminana a picnic alligator coffee a Maya pee questions Luna Jo Harper hair Quay extra questions cause she'd be near dividend policy pen okay now what are we doing in the shafted dividend policy we are trying to learn the impact of the policy on dividend that company follows with respect to dividend on the share price so coming a dividend policy uske impact on the share price is known as dividend policy J chapter may we have to learn the impact that company follows with reference to dividend policy on the share price for this we have got four bodies dividend policy the first model is known as traditional model the second model is by Walter the third model is by Gordon and the fourth model is by mm but is modigliani-miller subset pala model traditional model formulas ER technique is ruining a questions athenaeus paper traditional model cough oh man yah Fonda that dividend has positive impact on shape rice positive impact on share price comma Club higher the dividends higher the price of the share lower the dividend lower the rise of the share are we exactly clear with that one paka so we are looking at traditional model that is dividend has a positive impact so companies paying higher dividend have a better share price companies paying a lower dividend have a lower share price that was traditional Walter mainly the questions that I have seen in examinations are from Walter are from Gordon and bought from mmm Gordon basically how many quitting maybe bought practice Kia formula Garoppolo IV is equal to D 1 upon r e minus G so in that case Joe evita that was or the formula was given by Gordon Humaira kunio not JB talk to a Formula D 1 upon r e- g pod parkia water according to Walter price of the share calculate Omega formula hair price is equal to D upon k plus R upon K e minus D the whole upon k yah Donna a formula repeat guru marry Sahara the formulas for Walter this was traditional I am going to Walter Walter model K sub say the price of the share is equal to D upon k plus R upon K e minus T the whole upon K D upon k plus R upon K e minus D the whole upon K E one more time ok banker or below D upon k plus R upon K e minus T the whole upon K okay d stands for dividend K is the cost of equity R is return on equity I kept on telling you during devising first factor that is equally valuation may that are we alert or re Alec re is equal to K R we rate of return on equity Ari's expected return by CAPM rf+ Beach RM minus RF are we return on equity re investor a cappella calculator again are we invest Carnegie bar calculate caring in for fakeness so are we upon K E is earnings minus D is dividend upon K at the interpretation of this model is that if companies are we is greater than companies re that is K re and KS in on himself toward us our difference actually but from your point you can use this as synonyms and let's not discuss the depth of that right now re and re comparison karna if R we return on equity is greater than the expected or people are expecting 12% I am giving them 14% then people are okay with not getting dividend company should follow 100 percent payout policy if our o e is less than R e gummy should follow this was sorry a hundred percent retention policy company should follow 100 percent pay out policy I'll take that again because mentally cleotasha vampyre are we if company is earning more than loboko TK by dividend madhurya to marry investor autumn Giada come up so come you should follow 100% retention policy to get maximum share price if our way is less than re if our owing company is earning 10% people are expecting 15% or homonka dividend needing a by choosing a share price kimochi Agha if ROA is less than re company should follow a 100 percent payout policy by dividend Edo because people are expecting 15 now so they will invest somewhere else and get 50 math attend a rouse a dividend a doe and third if our o e is equal to re this is known as indifference dividend though dividing mundo share price will remain same and I got a bakery on a very versatile he took conclusions and a man named Walter Kelly did okay hey or God until he became Walter and what if now I feel them both might be brothers donaga collie formula log a way to teach all again but concepts Amon are we exactly Klee a concept semen but Java map is Agatha baking it belly wall turkey burger with a shallow formulary Peter of wall Chaka price of the share is equal to D upon k plus R upon K e minus T the whole upon K if ro is greater than re 100% retention if ro is less than re hundred percent payout if ro is equal to re in difference so did you understand this Walter and to prove this and have a question guys for you pressure number one if you look at first one the following information is available with respect to to all institute coach in limited earning per share rupee ten that's constant cost of capital K point ten that's ten percent that is also constant find out the market value of the share under the following cases if the rate of return is eight percentage 10% or 12% and if the payout ratio is 0 40 80 and 100 first one race question number one mod samples are given a class maybe cover first thing if ro e is equal to 8 percent ke to ten constant and earnings be ten constant ro yoga 8% Autopia so payout ratio of is zero layout ratio is 20 or 40 40 payout ratio is 180 and payout ratio is honey perfect first one formula latina haha papel examination now baking a solution may be Cooperman a formula a cappella d upon k plus R upon ke minus t upon k now even before I start solving anything right here ro is 8 and K is 10 cost of equity stand that is people are expecting 10 a morning 10 I'm owning 8 less than 10 what should I do I should follow 100 percent payout policy 100 percent payout policy meth lab after answer yaha P sub says God on Acharya check our little first one payout zero zero by 10 percent plus 8 by 10 10 minus 0 upon 10 percentage is equal to 8 by 10 calcifies please 10 minus 0 is 10 so 8 by 10 is point 8 into 10 is 8 divided by 10 percentage I am getting 80 per share rupee 80 per share next one 4 by 10 percent plus 8 by 10 10 minus 4 by 10 percent is equal to 40 plus 8 by 10 into 6/10 48 is equal to 88 per share I have seen share price increasing I told you share price is up say maximum on Achaia of yaja peggle op work incurring it so it will be 60 plus up k solution may check early gia 80% a non 60 80 plus 16 is equal to rupee 96 per share or 100% yoga number correct it will be rupee 100 per share so that's what I told you that you should follow 100 percent payout policy clear perfect now second if are we yeah happy are ye was eight percent a be humbled way that if ro e is equal to ten percent then if ro is equal to get no percent 10 and re is also equal to 10 that is indifferent so all the same price year will be exactly the same have a look at it zero by 10 percent 10 by 10 10 minus zero by 10 percentage is equal to rupee hundred per share for by 10 percent plus 10 by 10 10 minus 4 by 10 percent agoura by appearing at the 40 plus 60 is equal to 100 per share Rai Sahab Yaga 80 plus 20 is equal to rupee hundred per share or guys youngja / bi guru P hundred per share are we exactly clear 200 per share 100 per share hundred per share 100 per share individual third and the last one guys point number three are o e is equal to 12 percentage I guess checker our o e is equal to 12 percentage so if I'm not wrong my ro is equal to 12 percent ERP it means that my share price has to be maximum at zero percent payout or 100 percent retention because our waste well I'm earning more than what people need people need 10 I am giving them 12 by dividend knee they got their APIs are a thumb business me I will reinvest Hana I were deciding that so check our lobby 0 by 10 percent plus 12 by 10 10 minus 0 upon 10 percent is equal to 1 point 2 into 10 is 12 I 10 percent is equal to rupee 120 per share yoga uh tracker in it which will be 4 by 10 percent plus 12 by 10 10 minus 6 by 10 percent check the answer that you should be getting 40 plus 72 is equal to hundred and 12 so you are looking at prices decreasing yeha yeha rupee 80 plus 24 is equal to rupee hundred and four Yaga rupee hundred per share so if you are looking at it properly you are getting a share price of 120 maximum per cup clear jaga's walter formula d upon k + r upon k e – d upon k if ro is greater than k ro is greater 100 percent retention if ro is less than k 100 percent payout if ro is equal to k indifferent got that h o come back second model which other Gordon the father of a nonce basically father of any quit evaluations basically is equal to RI V is equal to D 1 upon K minus G kind of formula lager Callie formula log a or could be a lugnut guys this question man could be alertly opposite pellet G calculate an operator so this goes around way actually formula 11 occurred is a pellet G calculator ojika formula Adana put G is equal to BR and kato hey d1 hey understanding same if ro is greater 100% retention if ro is less 100% payout if ro is equal to absolutely different clear so now we'll try a question on Gordon but understanding has to remain same recording tech limitation which we will discuss question number two the yield question number two garden earning per share scene 10 and cost of capital again same 10 find out the market price of the share under different rates of return when R is equal to 8 r is equal to 10 r is equal to 15 and your payouts are 0 40 80 and 100 so I've just changed that last one or 10 8 10 and 12 of our OEM first one your payout is equal to 0 your payout is equal to 40 your payout is equal to 80 your payout is equal to hundred perfect now first and foremost guys 1 if ro e is equal to 8 percent if ro is equal to 8 percentage to total of ikana Jimena people like a calculator and a breakage e and g is equal to d r Cooper like the top space constraint ethanol G is equal to V R B stands for attention R stands for our way if zero percent payout retention is 100 percentage into 8 percent is equal to 8 percentage 40% is payout so retention is 60 into 8 percentage is equal to 16 to 8% if I'm not wrong I guess we'll get 4.8 I am correct 20 into 8 percentage is equal to 1.6 and 0 into 8 percentage is equal to 0 perfect clear to be a beam Bellingham looming Rose calculate K alpha log share price calculate carrying a formula and standardization remains the same that is or checker law of cancer retention is 160 20 0 and growth is 8% 4.8% 1.6 percent and 0% the price of the share IE is equal to D 1 upon K minus G d-10 percent payout so dividend is 0 by K 10 percent growth 8% your answer will remain 0 atcha and before I go ahead now ROA is a percent K is 10 percent companies owning less so in that case the policy should be if ROA is less than re the policy should be 100 percent payout 100 percent paid out to aapke share price sub says Adonijah 100 PEM and that's what you will see now the share price increasing chillin payout 40% 4 / 0.1 minus point zero four eight is equal to check the answers that you are getting rise 4 divided by 0.1 minus point zero four eight is equal to seventy six point nine two is it increasing per share next one eight divided by 0.1 minus point zero one six you have a share price of ninety two point two four so 95 point two four share price increasing and last one ten by ten percentage is equal to rupee 100 per share share prices maximum at red person me out got that too good second time they are saying ro e is equal to 10% if ro e is equal to 10% then 100 into 10 percent is equal to 10 percent 60 into 10 percent is equal to 6 percent 20 into 10 percent is equal to 2 percent and 0 into 10 percent is equal to 0 percent and even if before I start any of the calculations your ROA is equal to 10 percentage the marking point re is equal to 10 percent if ro E is equal to re can I say we are indifferent towards the share price all the share price would come same except the first one this is the limitation guys of God in a good dividend 10 a.m. to share price can say I got so actually KO family man at 0% you will always get a share price of zero only that's limitation of Gordon another limitation of garden that you should remember what equity analysis may be our Nishita question the economy acquiesce our division K time is if growth exceeds re other yeah though again we cannot calculate the share price anyways going ahead so is equal to 0 by 0.1 minus 0.1 your answer will remain 0 4 by 0.1 minus point zero 6 share price will be rupee 100 per share 8 by 0.1 minus point zero 2 will be equal to rupee 100 per share and finally 10 by 10 percentage will be equal to rupee hundred per share so share price is 100 share prices 100 share price is hundred and share price is 100 up to jaga's in different first polygons yummy enough next one third if ro e is equal to 15 percentage ro is greater than re then the company should follow zero percent payout that is 100% retention policy but Gordon Lee kun-hee a theory vanayya but guarding leak occurs zero percent by the way answer in EAJA so literally was Hiroko pocket amatriciana in this case it comes simple sacani a a key by Johanna price zero ah never lies you will get a best shape rise in the next payout ratio so best ratio not the best ratio the best shape rise will be your on the second level perk up check out them first one G is equal to BR me buna so 100 into 15 percentage is equal to 15 percentage 60 into 15 percentage is equal to nine percentage 20 into 15 percent 8 is equal to 3 percentage and 0 into 15 percentage is equal to 0 share price gothic o0n every bit as a formality 0 by 0.1 minus 0.15 one limitation second limitation though no limitations are get 0 if dividend is 0 answer will always remain 0 if growth exceeds re answer will always remain 0 vulture is our – much like an examination member second is 4 by 0.1 – point 0 9 4 by 1 percentage share price is equal to rupee 400 per share and I am telling you right now also that you are going to get the share price which is maximum maximum are we clear with that one okay perfect next 1/8 by 0.1 minus point zero three check our Latham answer rather than wasting by time too much on it 8 by 0.1 minus 0.23 is 114 point two eight five per share and the last one we have got same that is ten by ten percentage is equal to rupee 100 per share any doubts pakka that's Gordon Walter Gordon formula again but fundamental same El Cholo schematic all questions are coming up will he show up question number three per diem again Gordon pair with the following information or the figures calculate market price of the share by using dividend growth model that is Gordon earning per share is ten cost of capitalist waning internal rate of return is 25 retention ratio is 60 percentage and they are asking you to calculate the share price what simples RHR Micheli examination by Iowa question number three Gordon model ASAP say IV of the share is equal to D 1 upon r e- g or you can even say K upon G first 1k 10 percentage are o e 25 year retention ratio 16 year G is equal to BR retention 60 into ro e 25 percentage is equal to 15 percentage is the growth do you agree retention ratio is 60 an internal rate of return 25% 60 into 25 percent is 15 percent kay is 20% that's what I was confused and a very 8/10 of the dawn Sergey say Arthur perfect if growth exceeds Ariane say cannot come so I misinterpreted it's not ten it's twenty percentage and then they are asking you to calculate IB of the shed b1 is equal to earnings of the company was equal to ten retention was 60 d1 k-palette payout is 100 minus 60 is equal to 40 percentage so d1 is equal to 10 into 40 percentage is equal to 4 other up for many lectures wherever say other tumanako kartha owning such a big um dividend recalling it will be d1 always finally IV of the share is equal to d1 4 upon re point to minus 0.15 that is 4/5 percentage is equal to rupee 80 per share 4 divided by 0.5 to be 80 per share a cup that's something that is known as God of the third or I would rather say the fourth one this is Gordon done fourth is MN monoclonal Miller approach now according to model any miller approach the best approach actually is that dividend policy is irrelevant with reference to share price what does it mean it means simple thing company dividing they your dividend now there it will not have any impact on the share price or post case of sake formula RK books may again leak however my name is p0 is equal to D 1 plus P 1 upon 1 plus k p0 price today is equal to dividend 1 plus price at the end of the year upon 1 plus K occur okay taking this ahead they kept Isis kasi calculate hmmm pick up a question number four question number four SRT Limited has a capital of rupees 10 lakh in equity shares of hundred each so we have got ten thousand shares the shares are currently quoted at part four would be hundred children the company proposes to declare a dividend of rupees ten per share at the end of financially or the capitalization rate for the risk class to which the company belongs to L percent what will be the market price of the share at the end of the year if a or dividend is not declared dividend is declared and assuming that company pays dividend and has a net profit of five lakh and makes new investment of 10 lakh during the period how many new shares must be it should use the MM body now modigliani-miller money mm question number 4 mm oniy a dividend is not declared and be dividend is declared dividend is not declared and dividend is declared first one the formula p 0 is equal to B 1 plus P 1 upon 1 plus K dividend not declared 0 price of the share 100 T 1 do not have 1 plus K cost of capital 12% 1.12 so P 1 is equal to 100 into 1 point 1 212 100 is equal to 0 dividend is declared dividend is declared at the rate of 10% 10 plus P 1 upon 1 point 1 2 so my P 1 is equal to 112 minus 10 102 the difference between this two is rupee 10 per share which is nothing but the we did so if company declares the dividend the price of the share in the market will be hundred and two if company does not declare the dividend the price of the share will be hundred and twelve the difference between these two prices will be nothing but rupee chain clear perfect – good dividends not declared dividend declared or please interpretation right John Archie as so much so much the price per share say Maya price per share may Bowie difference I got that will be equal to divided God – good and third one see but low assuming the company pays a dividend and has a net profit of file a company pays the dividend has a net profit of file AK minus the dividend 10 per share we had 10,000 shares and 10 per share is 1 lakh cut dividend Shailaja bracket milic now that is ten thousand into ten so four lakh bachi that is my retained earnings company wants to make new investments of 10 new investments are needed for 10 lakh 4 lakh and Chandler cancer comes to 6 lakh new funds can be issued by equity shares 6 lakh dividend is paid if the dividend is paid price per share will be 102 divided by 100 into 6 lakhs divided by 102 you will checkup fight two eight eight two point three five five eight eight two point three five that is five eight eight three shares Kimiko issue karna hoga simple is that it 'no profit type a dividend chala get married in earnings in the new funds differences requirement of new funds divided by price per share a guru nanaka author dividend is not paid to file at – couch meaning 5 lakh new investments 10 lakh answer file are divided bounded enchilada Germany next question may cover here so basically the época extra partha what does modigliani-miller comes and tells you by key dividend paper Oh God the we did pay maker share price remains same subsidizing bond a nazuna momento llego Modigliani and Miller sorry to say that but they proved their theory all the time a chi BCC maybe Theory da according to them couch nigga machi automatically market forces will work everything will be like contract but come a call question is please question number 5 German engineering company has 10 lakh equity shares outstanding at the start of the accounting year 10 lakh equity shares outstanding number the ruling market price of the share is 150 so current market price is 150 the board of directors of the company contemplates declaring rupee 8 per share as dividend at the end of the current year the rate of capitalization appropriate to the risk class to which the company belongs is 12 percent so k is 12 percent dividend is 8 based on MM approach calculate the market price per share and when contemplated dividend is declared and not declared one by one question one by one so dividend declared dividend not declared I am answering question number one this is not question number four this is question number five p 0 150 not declared 0 plus P 1 upon 1 point 1 2 P 1 is equal to 15 to 1 point 1 to 150 into 1 point 1 3 168 per share 150 is equal to dividend is 8 plus P 1 divided by 1 point 1 2 so P 1 will be equal to 160 per share 168 and 160 per share the difference is rupee 8 per share which is equivalent to the dividend that company is planning to do so that is either livens check that out 168 + 160 the difference and the share price will always be equal to dividend question be how many new shares will have to be issued by the company at the end of accounting EUR on the assumption that net income is 2 Koror investment for Koror about dividends are distributed and not distributed be net income to Koror less the dividend no dividend to corrode so retain donning what is net new investments poker or how much of new funds we need to corrode / the share price 168 – Koror by 168 I'm picking up the answers from the textbook eyes dividend is not declare holodeck Nicole Amma so to Koror by 168 is equal to 1 lakh 19,000 0 for HS rounded off them acharya happy to peruse dividend is declared 8 per share 8 percent 10 lakh into 880 lacquered evidential Agha 1 Kuro 20 lakh much aware we required folk arose we require to corrode 80 lakh as new funds but this time the number the price is 160 so the number of shares that you need is 1 lakh 75,000 musha's concept some job third one see so the total value of the share at the end of the accounting EUR will remain the same prove that a coefficient of issue carlo total market cap same riga third one what was old number 10 lakh what is new issue 1 lakh 19 thousand 48 so total number is 11 lakh 19,000 0 4 8 the price of the share will be 1 lakh 68,000 and you will get an answer totally at 18 lakh 18 car or 80 lakhs of course up here numbers in multiplier Bogota put toward or difference the Giga because Homme neige Cooper wale number per round off cata agora PA number for constant pure decimals Melo gate was good 10 lakhs a ad karaage and into 168 karaage trances Nehemiah same on suryya exactly same 10 lakh plus 1 lakh 75 thousand shares 11 lakh 75 thousand shares you know but plus the price of the share now is equal to 160 and you are going to get rupee 18 lakh 80 18 corrode 18 lakh as market capitalization that's modigliani-miller they say dividend pay Kuro dividend pinnacle the price of the share will also remain same difference will be only the dividends and market cap will also remain the same but cough come back come last dividend policy in a nutshell once in building for logistics one traditional higher the dividend higher the share price Walter and Gordon Walter formula first price of the share is equal to D upon k plus R upon ke minus T upon K Gordon IV is equal to D 1 upon r e- g dono Kunduz same s innately dividend buckaroo share price bottarga if ro is greater than re no dividend 100% retention if ro is less than re hundred percent payout no retention if re is equal to k share prices in different you pay the dividend you don't pay the dividend he says always pay the dividend they say look at our oer ue then pay the dividend and finally mm say is again absolutely indifferent share price are not affected by something that is known as dividends jacques clear – good so this was dividend policy we cannot afford to spend some more time on this chapter let's stop this right here next topic

31 thoughts on “Dividend Policy – 1

  1. Mary plc has made a profit over the past year of $120000. Its gearing ratio is 0.4 and its costbif capital are Equity 22%perannum.
    Retained earnings 20% perannum. Debt 10% perannum.
    four projects are under considerations and particulars are as follows. Project A investment required $60000. IRR 19%
    project B investment required $50000 IRR 18%
    Project C investment required $80000 IRR 17%
    Project D Investment required $20000 IRR 16%
    What dividend should be paid?

  2. How to identify r and ke in the question….. Which one is actual capitalisation rate and which one is normal capitalisation rate

  3. main 2months se lupin ke share pe hold kiya hai…kuch din pahele divident ghosna kiya tha…lekin avi tak mila nahi…mujhe kiya karna chahiye?

  4. Dividend Policy MCQs
    http://www.accountingmcqs.com/Dividend-Policy
    Prepare yourself for exams. Answer the ‪‎MCQs‬ of #Property #Plant and #Equipment, #Responsibility #Accounting and #Performance #Measures, #Standard #Costs and #Variance #Analysis, #‎Financial‬ ‎#Statements, #Cost #Management, #Deferred #Tax, #Internal #Auditing and #Systems #Controls, ‪‎#Dividend‬ ‎#Policy and many more. Detailed answers are also there

  5. sir, i want your video cd filled with of entire financial management course. please let me know if you want to provide me.

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  7. sir. ..if company follow 100% retention policy. …then ..from where they pay dividend as per Walter model

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