The following information relates to the acquisition of M plc by D plc:   Recent dividend of M plc:                           20p per share  Expected dividend growth of M plc:          3% per year  Cost of equity of D plc:                                10%  Number of shares of D plc:                        20 million  Cost of equity of M plc:                               8%  Number of shares of M plc:                        15 million  What is the market value suggested by the dividend valuation model?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 5P
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The following information relates to the acquisition of M plc by D plc:

 

Recent dividend of M plc:                           20p per share

 Expected dividend growth of M plc:          3% per year

 Cost of equity of D plc:                                10%

 Number of shares of D plc:                        20 million

 Cost of equity of M plc:                               8%

 Number of shares of M plc:                        15 million

 What is the market value suggested by the dividend valuation model?

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