Question

(b) A company has a total equity capital of 50,00,000 comprising
of equity share of 10 each. It earns a return of 12% on its investments
off 50,00,000. The appropriate discount rate for the firm is 10%. Using
Gordon's model, compute the share price of the company if the
company has a policy of declaring 50% dividend.
What would be your answer if the company earns a return of 8%
on its investments?
6​

Answer 1

Answer:

It earns a return of 12% on its investments off 50,00,000. The appropriate discount rate for the firm is 10%. ... Gordon's model, compute the share price of the company