Explain the difference in assumptions in the Gordon's growth model and Solomon's model in the calculation of share price
(2mks)
b) Kirengo Company Ltd is expected to announce a dividend per share of Shs.
10 next year. The future annual growth rate in dividends and hence capital gain is expected to be 4%. The company's existing assets generate in perpetuity a constant annual amount of earnings per share (EPs) of Shs. 0.37 and retains in perpetuity a constant annual proportion of 0.4 of EPS from existing assets and a constant annual rate of return of 15%. The company's discount rate is 12%
Required:
Calculate the share price using:
i. Gordon's' ground model(2mks)
ii. Solomon's model(3mks)