Yvonne570
offlineMember
Like this (constant growth model):
Investor wants to buy company shares in 2 years. Growth rate expected to be 5%. Dividend $20 and discount rate 10%. How much is investor willing to invest?
Well, it's 463.
20 x (1.05)2 = 22.05
22.05 x 1.05/.05-.10 = 463
LOL. Everyone should know this.
Justinnnn
offlineMember
Yvonne ur example is wrong it should be growth rate to the power of the period PLUS ONE so to the power of 3 to project 2 years of growth
The formula is (div per share x (1+growth rate)^(n+1)) / (rate of return - growth rate). Probably the bec3 error in ur book
Yvonne570
offlineMember
Now i'm looking at the updates and am not very happy. I was right with the PEG formula and the Becker MCQ was wrong. I was trying for hours to figure it out:( It's another problem B3-76. This is not cool of you Becker.
Yvonne570
offlineMember
Okay my test was rescheduled for today at noon - ready to take off soon. After 16 straight hours yesterday studying with Becker, I just hope i'm not doomed. They had the PEG formula and the constant growth model all wrong. Hard enough trying to learn and memorize these high level ratios without the review program (I spend 3200 bucks on) giving me wrong information. Very draining. I'm pretty tolerant to mistakes; however, when the price tag increases, my tolerance level decreases - cost of quality ppl.
You must log in to post.