Dividend Policy, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com

third chapter on the list to get done
with equity we are done with bonds I'm
going to the next chapter that is known
as a small chapter now dividend policy
people at times you know argue that this
chapter should not be done I am with all
of them it should not be done see a
final level Peter J chapter knew not
cheer up Kalia chap th after at times
our jatha chalma at McKinley so guys
please don't leave the chapter or a
cilium NSF near division maybe recur in
fact muted photos of Bookman arminana a
picnic alligator coffee a Maya pee
questions Luna Jo Harper hair
Quay extra questions cause she'd be near
dividend policy pen okay now what are we
doing in the shafted dividend policy we
are trying to learn the impact of the
policy on dividend that company follows
with respect to dividend on the share
price so coming a dividend policy uske
impact on the share price is known as
dividend policy J chapter may we have to
learn the impact that company follows
with reference to dividend policy on the
share price for this we have got four
bodies dividend policy the first model
is known as traditional model the second
model is by Walter the third model is by
Gordon and the fourth model is by mm but
is modigliani-miller subset pala model
traditional model formulas ER technique
is ruining a questions athenaeus paper
traditional model cough oh man yah Fonda
that dividend has positive impact on
shape rice
positive impact on share price comma
Club higher the dividends higher the
price of the share lower the dividend
lower the rise of the share are we
exactly clear with that one paka so we
are looking at traditional model that is
dividend has a positive impact so
companies paying higher dividend have a
better share price companies paying a
lower dividend have a lower share price
that was traditional Walter mainly the
questions that I have seen in
examinations are from Walter are from
Gordon and bought from mmm
Gordon basically how many quitting maybe
bought practice Kia formula Garoppolo IV
is equal to D 1 upon r e minus G so in
that case Joe evita that was or the
formula was given by Gordon Humaira
kunio not JB talk to a Formula D 1 upon
r e- g pod parkia water according to
Walter price of the share calculate
Omega formula hair price is equal to D
upon k plus R upon K e minus D the whole
upon k yah Donna a formula repeat guru
marry Sahara the formulas for Walter
this was traditional I am going to
Walter Walter model K sub say the price
of the share is equal to D upon k plus R
upon K e minus T the whole upon K D upon
k plus R upon K e minus D the whole upon
K E one more time ok banker or below D
upon k plus R upon K e minus T the whole
upon K okay d stands for dividend
K is the cost of equity R is return on
equity I kept on telling you during
devising first factor that is equally
valuation may that are we alert or re
Alec re is equal to K R we
rate of return on equity Ari's expected
return by CAPM rf+ Beach RM minus RF are
we return on equity re investor a
cappella calculator again are we invest
Carnegie bar calculate caring in for
fakeness
so are we upon K E is earnings minus D
is dividend upon K at the interpretation
of this model is that if companies are
we is greater than companies re that is
K re and KS in on himself toward us our
difference actually but from your point
you can use this as synonyms and let's
not discuss the depth of that right now
re and re comparison karna if R we
return on equity is greater than the
expected or people are expecting 12% I
am giving them 14% then people are okay
with not getting dividend company should
follow 100 percent payout policy if our
o e is less than R e gummy should follow
this was sorry a hundred percent
retention policy company should follow
100 percent pay out policy I'll take
that again because mentally cleotasha
vampyre are we if company is earning
more than loboko TK by dividend madhurya
to marry investor autumn Giada come up
so come you should follow 100% retention
policy to get maximum share price if our
way is less than re if our owing company
is earning 10% people are expecting 15%
or homonka dividend needing a by
choosing a share price kimochi Agha if
ROA is less than re company should
follow a 100 percent payout policy by
dividend Edo because people are
expecting 15 now so they will invest
somewhere else and get 50
math attend a rouse a dividend a doe and
third if our o e is equal to re this is
known as indifference dividend though
dividing mundo share price will remain
same and I got a bakery on a very
versatile he took conclusions and a man
named Walter Kelly did okay hey or God
until he became Walter and what if now I
feel them both might be brothers donaga
collie formula log a way to teach all
again but concepts Amon are we exactly
Klee a concept
semen but Java map is Agatha baking it
belly wall turkey burger with a shallow
formulary Peter of wall Chaka price of
the share is equal to D upon k plus R
upon K e minus T the whole upon K if ro
is greater than re 100% retention if ro
is less than re hundred percent payout
if ro is equal to re in difference so
did you understand this Walter and to
prove this and have a question guys for
you pressure number one if you look at
first one the following information is
available with respect to to all
institute coach in limited earning per
share rupee ten that's constant cost of
capital K point ten that's ten percent
that is also constant find out the
market value of the share under the
following cases if the rate of return is
eight percentage 10% or 12% and if the
payout ratio is 0 40 80 and 100 first
one race question number one mod samples
are given a class maybe cover first
thing if ro e is equal to 8 percent ke
to ten constant and earnings be ten
constant ro yoga 8% Autopia so payout
ratio of
is zero layout ratio is 20 or 40 40
payout ratio is 180 and payout ratio is
honey
perfect first one formula latina haha
papel examination now baking a solution
may be Cooperman a formula a cappella d
upon k plus R upon ke minus t upon k now
even before I start solving anything
right here ro is 8 and K is 10 cost of
equity stand that is people are
expecting 10 a morning 10 I'm owning 8
less than 10 what should I do
I should follow 100 percent payout
policy 100 percent payout policy meth
lab after answer yaha P sub says God on
Acharya
check our little first one payout zero
zero by 10 percent plus 8 by 10 10 minus
0 upon 10 percentage is equal to 8 by 10
calcifies please 10 minus 0 is 10 so 8
by 10 is point 8 into 10 is 8 divided by
10 percentage I am getting 80 per share
rupee 80 per share
next one 4 by 10 percent plus 8 by 10 10
minus 4 by 10 percent is equal to 40
plus 8 by 10 into 6/10 48 is equal to 88
per share I have seen share price
increasing I told you share price is up
say maximum on Achaia of yaja peggle op
work incurring it so it will be 60 plus
up k solution may check early gia
80% a non 60 80 plus 16 is equal to
rupee 96 per share or 100% yoga number
correct it will be rupee 100 per share
so that's what I told you that you
should follow 100 percent payout policy
clear perfect now
second if are we yeah happy are ye was
eight percent a be humbled way that if
ro e is equal to ten percent then if ro
is equal to get no percent 10 and re is
also equal to 10 that is indifferent so
all the same price year will be exactly
the same
have a look at it zero by 10 percent 10
by 10 10 minus zero by 10 percentage is
equal to rupee hundred per share for by
10 percent plus 10 by 10 10 minus 4 by
10 percent
agoura by appearing at the 40 plus 60 is
equal to 100 per share Rai Sahab Yaga 80
plus 20 is equal to rupee hundred per
share or guys youngja / bi guru P
hundred per share are we exactly clear
200 per share 100 per share hundred per
share 100 per share individual third and
the last one guys
point number three are o e is equal to
12 percentage I guess checker our o e is
equal to 12 percentage so if I'm not
wrong my ro is equal to 12 percent ERP
it means that my share price has to be
maximum at zero percent payout or 100
percent retention because our waste well
I'm earning more than what people need
people need 10 I am giving them 12 by
dividend knee they got their APIs are a
thumb business me I will reinvest Hana I
were deciding that so check our lobby 0
by 10 percent plus 12 by 10 10 minus 0
upon 10 percent is equal to 1 point 2
into 10 is 12 I 10 percent is equal to
rupee 120 per share yoga uh tracker in
it which will be 4 by 10 percent plus 12
by 10 10 minus 6 by 10 percent check the
answer that you should be getting 40
plus 72 is equal to hundred and 12 so
you are looking at prices decreasing
yeha yeha rupee 80 plus 24 is equal to
rupee hundred and four Yaga rupee
hundred per share so if you are looking
at it properly you are getting a share
price of 120 maximum per cup clear
jaga's walter formula d upon k + r upon
k e - d upon k if ro is greater than k
ro is greater 100 percent retention if
ro is less than k 100 percent payout if
ro is equal to k indifferent got that h
o come back second model which other
Gordon
the father of a nonce basically father
of any quit evaluations basically is
equal to RI V is equal to D 1 upon K
minus G kind of formula lager
Callie formula log a or could be a
lugnut guys this question man could be
alertly opposite pellet G calculate an
operator so this goes around way
actually formula 11 occurred is a pellet
G calculator ojika formula Adana put G
is equal to BR and kato hey d1 hey
understanding same if ro is greater 100%
retention if ro is less 100% payout if
ro is equal to absolutely different
clear so now we'll try a question on
Gordon
but understanding has to remain same
recording tech limitation which we will
discuss question number two the yield
question number two garden earning per
share scene 10 and cost of capital again
same 10 find out the market price of the
share under different rates of return
when R is equal to 8 r is equal to 10 r
is equal to 15 and your payouts are 0 40
80 and 100 so I've just changed that
last one or 10 8 10 and 12 of our OEM
first one your payout is equal to 0 your
payout is equal to 40 your payout is
equal to 80 your payout is equal to
hundred perfect now first and foremost
guys 1 if ro e is equal to 8 percent if
ro is equal to 8 percentage to total of
ikana Jimena people like a calculator
and a breakage e and g is equal to d r
Cooper like the top space constraint
ethanol G is equal to V R B stands for
attention R stands for our way if zero
percent payout retention is 100
percentage into 8 percent is equal to 8
percentage 40% is payout so retention is
60 into 8 percentage is equal to 16 to
8% if I'm not wrong I guess we'll get
4.8 I am correct
20 into 8 percentage is equal to 1.6 and
0 into 8 percentage is equal to 0
perfect clear to be a beam Bellingham
looming Rose calculate K alpha log share
price calculate carrying a formula and
standardization remains the same that is
or checker law of cancer retention is
160 20 0 and growth is 8% 4.8% 1.6
percent and 0% the price of the share IE
is equal to D 1 upon K minus G d-10
percent payout so dividend is 0 by K 10
percent growth 8% your answer will
remain 0 atcha and before I go ahead now
ROA is a percent K is 10 percent
companies owning less so in that case
the policy should be if ROA is less than
re the policy should be 100 percent
payout 100 percent paid out to aapke
share price sub says Adonijah 100 PEM
and that's what you will see now the
share price increasing chillin payout
40% 4 / 0.1 minus point zero four eight
is equal to check the answers that you
are getting rise 4 divided by 0.1 minus
point zero four eight is equal to
seventy six point nine two is it
increasing per share next one eight
divided by 0.1 minus point zero one six
you have a share price of ninety two
point two four so 95 point two four
share price increasing and last one ten
by ten percentage is equal to rupee 100
per share share prices maximum at
red person me out got that too good
second time they are saying ro e is
equal to 10% if ro e is equal to 10%
then 100 into 10 percent is equal to 10
percent 60 into 10 percent is equal to 6
percent 20 into 10 percent is equal to 2
percent and 0 into 10 percent is equal
to 0 percent and even if before I start
any of the calculations your ROA is
equal to 10 percentage the marking point
re is equal to 10 percent if ro E is
equal to re can I say we are indifferent
towards the share price all the share
price would come same except the first
one this is the limitation guys of God
in a good dividend 10 a.m. to share
price can say I got so actually KO
family man at 0% you will always get a
share price of zero only that's
limitation of Gordon another limitation
of garden that you should remember what
equity analysis may be our Nishita
question the economy acquiesce our
division K time is if growth exceeds re
other yeah though again we cannot
calculate the share price anyways going
ahead so is equal to 0 by 0.1 minus 0.1
your answer will remain 0 4 by 0.1 minus
point zero 6 share price will be rupee
100 per share 8 by 0.1 minus point zero
2 will be equal to rupee 100 per share
and finally 10 by 10 percentage will be
equal to rupee hundred per share so
share price is 100 share prices 100
share price is hundred and share price
is 100
up to jaga's in different first
polygons yummy enough next one third if
ro e is equal to 15 percentage ro is
greater than re then the company should
follow zero percent payout that is 100%
retention policy but Gordon Lee kun-hee
a theory vanayya but guarding leak
occurs zero percent by the way answer in
EAJA so literally was Hiroko pocket
amatriciana in this case it comes simple
sacani a a key by Johanna price zero ah
never lies you will get a best shape
rise in the next payout ratio so best
ratio not the best ratio the best shape
rise will be your on the second level
perk up check out them first one G is
equal to BR me buna so 100 into 15
percentage is equal to 15 percentage 60
into 15 percentage is equal to nine
percentage 20 into 15 percent 8 is equal
to 3 percentage and 0 into 15 percentage
is equal to 0 share price gothic o0n
every bit as a formality 0 by 0.1 minus
0.15 one limitation second limitation
though no limitations are get 0 if
dividend is 0 answer will always remain
0 if growth exceeds re answer will
always remain 0 vulture is our - much
like an examination member second is 4
by 0.1 - point 0 9 4 by 1 percentage
share price is equal to rupee 400 per
share and I am telling you right now
also that you are going to get the share
price which is maximum maximum
are we clear with that one okay
perfect
next 1/8 by 0.1 minus point zero three
check our Latham answer rather than
wasting by time too much on it 8 by 0.1
minus 0.23 is 114 point two eight five
per share and the last one we have got
same that is ten by ten percentage is
equal to rupee 100 per share any doubts
pakka
that's Gordon Walter Gordon formula
again but fundamental same El Cholo
schematic all questions are coming up
will he show up question number three
per diem again Gordon pair with the
following information or the figures
calculate market price of the share by
using dividend growth model that is
Gordon earning per share is ten cost of
capitalist waning internal rate of
return is 25 retention ratio is 60
percentage and they are asking you to
calculate the share price what simples
RHR Micheli examination by Iowa question
number three
Gordon model ASAP say IV of the share is
equal to D 1 upon r e- g or you can even
say K upon G first 1k 10 percentage are
o e 25 year retention ratio 16 year G is
equal to BR retention 60 into ro e 25
percentage is equal to 15 percentage is
the growth do you agree retention ratio
is 60 an internal rate of return 25% 60
into 25 percent is 15 percent
kay is 20% that's what I was confused
and a very 8/10 of the dawn Sergey say
Arthur
perfect if growth exceeds Ariane say
cannot come so I misinterpreted it's not
ten it's twenty percentage and then they
are asking you to calculate IB of the
shed b1 is equal to earnings of the
company was equal to ten retention was
60 d1 k-palette payout is 100 minus 60
is equal to 40 percentage so d1 is equal
to 10 into 40 percentage is equal to 4
other up for many lectures wherever say
other tumanako kartha owning such a big
um dividend recalling it will be d1
always finally IV of the share is equal
to d1 4 upon re point to minus 0.15 that
is 4/5 percentage is equal to rupee 80
per share 4 divided by 0.5 to be 80 per
share a cup that's something that is
known as God of the third or I would
rather say the fourth one this is Gordon
done
fourth is MN monoclonal Miller approach
now according to model any miller
approach the best approach actually is
that dividend policy is irrelevant
with reference to share price what does
it mean it means simple thing company
dividing they your dividend now there it
will not have any impact on the share
price or post case of sake formula RK
books may again leak however my name is
p0 is equal to D 1 plus P 1 upon 1 plus
k p0 price today is equal to dividend 1
plus price at the end of the year upon 1
plus K occur okay taking this ahead
they kept Isis kasi calculate hmmm pick
up a question number four question
number four SRT Limited has a capital of
rupees 10 lakh in equity shares of
hundred each so we have got ten thousand
shares the shares are currently quoted
at part four would be hundred children
the company proposes to declare a
dividend of rupees ten per share at the
end of financially or the capitalization
rate for the risk class to which the
company belongs to L percent what will
be the market price of the share at the
end of the year if a or dividend is not
declared dividend is declared and
assuming that company pays dividend and
has a net profit of five lakh and makes
new investment of 10 lakh during the
period how many new shares must be it
should use the MM body now
modigliani-miller money
mm question number 4 mm oniy a dividend
is not declared
and be dividend is declared dividend is
not declared and dividend is declared
first one the formula p 0 is equal to B
1 plus P 1 upon 1 plus K dividend not
declared 0 price of the share 100 T 1 do
not have 1 plus K cost of capital 12%
1.12 so P 1 is equal to 100 into 1 point
1 212 100 is equal to 0 dividend is
declared dividend is declared at the
rate of 10% 10 plus P 1 upon 1 point 1 2
so my P 1 is equal to 112 minus 10 102
the difference between this two is rupee
10 per share which is nothing but the we
did
so if company declares the dividend the
price of the share in the market will be
hundred and two if company does not
declare the dividend the price of the
share will be hundred and twelve the
difference between these two prices will
be nothing but rupee chain clear perfect
- good dividends not declared dividend
declared or please interpretation right
John Archie as so much so much the price
per share say Maya price per share may
Bowie difference I got that will be
equal to divided God - good and third
one see but low assuming the company
pays a dividend and has a net profit of
file a company pays the dividend has a
net profit of file AK minus the dividend
10 per share we had 10,000 shares and 10
per share is 1 lakh cut dividend
Shailaja bracket milic now that is ten
thousand into ten so four lakh bachi
that is my retained earnings company
wants to make new investments of 10
new investments are needed for 10 lakh 4
lakh and Chandler cancer comes to 6 lakh
new funds can be issued by equity shares
6 lakh dividend is paid if the dividend
is paid price per share will be 102
divided by 100 into 6 lakhs divided by
102 you will checkup fight two eight
eight two point three five five eight
eight two point three five that is five
eight eight three shares Kimiko issue
karna hoga simple is that it 'no profit
type a dividend chala get married in
earnings in the new funds differences
requirement of new funds divided by
price per share a guru nanaka author
dividend is not paid to file at - couch
meaning 5 lakh new investments 10 lakh
answer file are divided bounded
enchilada
Germany next question may cover here so
basically the época extra partha what
does modigliani-miller comes and tells
you by key dividend paper Oh God the we
did pay maker share price remains same
subsidizing bond a nazuna momento llego
Modigliani and Miller sorry to say that
but they proved their theory all the
time a chi BCC maybe Theory da according
to them couch nigga machi automatically
market forces will work everything will
be like contract but come a call
question is please question number 5
German engineering company has 10 lakh
equity shares outstanding at the start
of the accounting year 10 lakh equity
shares outstanding number the ruling
market price of the share is 150 so
current market price is 150 the board of
directors of the company contemplates
declaring rupee 8 per share as dividend
at the end of the current year the rate
of capitalization appropriate to the
risk class to which the company belongs
is 12 percent so k is 12 percent
dividend is 8 based on MM approach
calculate the market price per share
and when contemplated dividend is
declared and not declared one by one
question one by one so dividend declared
dividend not declared I am answering
question number one this is not question
number four this is question number five
p 0 150 not declared 0 plus P 1 upon 1
point 1 2 P 1 is equal to 15 to 1 point
1 to 150 into 1 point 1 3 168 per share
150 is equal to dividend is 8 plus P 1
divided by 1 point 1 2 so P 1 will be
equal to 160 per share 168 and 160 per
share the difference is rupee 8 per
share which is equivalent to the
dividend that company is planning to do
so that is either livens check that out
168 + 160 the difference and the share
price will always be equal to dividend
question be how many new shares will
have to be issued by the company at the
end of accounting EUR on the assumption
that net income is 2 Koror investment
for Koror
about dividends are distributed and not
distributed be net income to Koror
less the dividend no dividend to corrode
so retain donning what is net new
investments poker or how much of new
funds we need to corrode / the share
price 168 - Koror by 168 I'm picking up
the answers from the textbook eyes
dividend is not declare holodeck Nicole
Amma so to Koror by 168 is equal to 1
lakh 19,000 0 for HS rounded off them
acharya happy to peruse dividend is
declared 8 per share 8 percent 10 lakh
into 880 lacquered evidential Agha 1
Kuro 20 lakh much aware we required folk
arose we require to corrode 80 lakh as
new funds but this time the number the
price is 160 so the number of shares
that you need is 1 lakh 75,000 musha's
concept some job third one see so the
total value of the share at the end of
the accounting EUR will remain the same
prove that a coefficient of issue carlo
total market cap same riga third one
what was old number 10 lakh what is new
issue 1 lakh 19 thousand 48 so total
number is 11 lakh 19,000 0 4 8 the price
of the share will be 1 lakh 68,000 and
you will get an answer totally at 18
lakh 18 car or 80 lakhs
of course up here numbers in multiplier
Bogota put toward or difference the Giga
because Homme neige Cooper wale number
per round off cata agora PA number for
constant pure decimals Melo gate was
good 10 lakhs a ad karaage and into 168
karaage trances Nehemiah same on suryya
exactly same 10 lakh plus 1 lakh 75
thousand shares 11 lakh 75 thousand
shares you know but plus the price of
the share now is equal to 160 and you
are going to get rupee 18 lakh 80 18
corrode 18 lakh as market capitalization
that's modigliani-miller they say
dividend pay Kuro dividend pinnacle the
price of the share will also remain same
difference will be only the dividends
and market cap will also remain the same
but cough come back
come last dividend policy in a nutshell
once in building for logistics one
traditional higher the dividend higher
the share price Walter and Gordon Walter
formula first price of the share is
equal to D upon k plus R upon ke minus T
upon K Gordon IV is equal to D 1 upon r
e- g dono Kunduz same s innately
dividend buckaroo share price bottarga
if ro is greater than re no dividend
100% retention if ro is less than re
hundred percent payout no retention if
re is equal to k share prices in
different you pay the dividend you don't
pay the dividend he says always pay the
dividend they say look at our oer ue
then pay the dividend and finally mm say
is again absolutely indifferent share
price are not affected by something that
is known as dividends jacques clear -
good so this was dividend policy we
cannot afford to spend some more time on
this chapter
let's stop this right here
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