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DOTCOM/MS-04 / 82 / you require divesting in the share ? we assume that the current price of BHEL's share is a fair price yield is 5.5 percent (13.20/240) and the expected growth rate is 10 percent. Therefore, you The expected dividend per share next year, DIV, is Rs.13.20 (12 x 1.10). The expected dividend minimum required rate of return is 15.5 percent. If you earn less than 15.5 percent, the current share price cannot be maintained. In a well-functioning capital market, the market price is the fair price of a share. Therefore, the shareholders expect the share to earn a minimum return that keeps the current share price intact. Por firms for which dividends are expected to grow at a constant rate indefinitely and the current market price is given, we can use modified Equation to estimate the capitalization or the required rate of return of the share: Po ke +8 (11) DIV (1) ke-z DIV Р Equity capitalization Rate : A company's share is currently selling for rs.50 per share. It is expected that a dividend of rs.3 per share after one year will grow at 8 percent indefinitely. What is the equity capitalization rate ? The equity capitalization rate is given s follows: DIV 3 +8 = =+0.8= 0.14or 14 percent Po 50 a ve ...
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