Academic MBA Question:
Case Study Question: Walter and Gordon model analyze the impact of distribution of dividends on the valuation of the firm but the formula used in both the cases are different. Company ABC Ltd wanted to evaluate the price of the share in both cases. The company earns Rs 5 per share and the cost of capital to the firm is 12%. The company earns return on investment of 15% and the firm is planning dividend payout ratio of 30%. Calculate
a. Price of the share using Walter Model.
b. Price of the share using Gordon model
Academic Assignment Answer: