Question
The shares of Century Textile Ltd are selling at Rs 20 per share. It had paid Rs 2 per share dividend last year. The
The shares of Century Textile Ltd are selling at Rs 20 per share. It had paid Rs 2 per share dividend last year. The estimated growth of the company is approximately 5 per cent per year. (i) Determine the cost of equity capital of the company. (ii) Determine the estimated market price of the equity shares if the anticipated growth rate (a) rises to 8 per cent, and (b) falls to 3 per cent. Ignore dividend tax. (iii) Determine the market price of the shares, assuming the growth rate of 20 per cent. Are you satisfied with your calculations?
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