Determine the value of a share in def ltd

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Maria has never invested in shares before, therefore she has come to you as a finance graduate for some advice. In your conversations with Maria you have determined her Required Rate of Return (RRR) to be 10.50%.

a) Determine the value of a share in DEF Ltd. if they paid a dividend of $3.20 this year and the dividend is expected to grow by 5% indefinitely. Show formula, variables, calculation and a concluding statement in your response.

b) Determine the value of a share in GHI Ltd. if in the current year they paid a constant dividend of $7.50.
Show formula, variables, calculation and a concluding statement in your response.

c) If the market price for each share in parts a) and b) is $65 per share, should Maria buy either or both shares? Justify your answer.

Reference no: EM132634860

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