Question 12.A.18: Calculate the value of an ordinary share in CDC Ltd using th...
Calculate the value of an ordinary share in CDC Ltd using the dividend yield method.
(Assume a lower rate of tax of 10 per cent.)
The value of an ordinary share using the dividend yield method will be:
P_{0}= \frac{0.5 × 100/90^{*}}{5}×100
= £11.11
* We may recall from Chapter 3 that the dividend as shown in the accounts must be ‘grossed up’ in order to obtain the gross dividend required for the equation.
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