Example of Market Model
Illustration:
For the past five (5) years, the MPS and DPS for XYZ Ltd were follows as:
|
|
1998
Shs.
|
1999
Shs.
|
2000
Shs.
|
2001
Shs.
|
2002
Shs.
|
|
MPS as at 31st Dec
DPS for the year
|
40
-
|
45
3
|
53
4
|
50
3
|
52
-
|
Required
Determine the estimated cost of equity/shareholders percentage yield for every of the years included.
Solution
|
Year
|
MPS
|
Capital gain
|
DPS
|
% Return
|
|
1998
|
40
|
-
|
-
|
-
|
|
1999
|
45
|
5
|
3
|
(5+3 /40) * 100 = (8/40) * 100 = 20%
|
|
2000
|
53
|
8
|
4
|
(8+4 /45) = (12/45) * 100 = 27%
|
|
2001
|
50
|
-3
|
3
|
(-3+3 /53) = (0/53) * 100 = 0%
|
|
2002
|
52
|
2
|
-
|
(2 +0 /50) = (2/50) * 100 = 4%
|