Q6

a). The following data relate to a firm: earnings per share Rs. 10, capitalization rate 10%, retention ratio 40%. Determine the price per share under Walters and Gordons models if the internal rate of return is 15%. [2.5*2=5 marks]

b). Give a detailed account on Walter and Gordons theory of relevance in the context of dividend policy. [2.5*2=5 marks]