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Explain why the observed share price for Company B at the end of 2021 (660 pence) differs from the share price you calculate in (
Explain why the observed share price for Company B at the end of 2021 (660 pence) differs from the share price you calculate in (bii), (ci) and (cii). (no more than 500 words) Question 2 A shareholder of Company B is concerned about the recent performance of the company. She has collected the following financial information. Year to 31 December 2019 2020 2021 Revenue in 'm 9.4 9.6 10.2 Earnings per share in pence 62.3 67.4 59.4 Dividend per share in pence 34.6 35.6 37.4 Closing ex-dividend share price in l 7.2 7.9 6.6 CAPM expected return (%) 10 129 The finance director of Company B proposes that it will pay no dividend in 2022, 2023 and 2024. The company will pay a dividend per share of 62 pence in 2025. It will then grow at 4% per year in 2026 and beyond. The expected cost of equity of Company B is 10% per year for 2022 and onward. Dividend is paid at the end of each year
Explain why the observed share price for Company B at the end of 2021 (660 pence) differs from the share price you calculate in (bii), (ci) and (cii). (no more than 500 words)
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