Finance Numericals

Multi stage growth model: In this model Company provides dividend to its shareholders at high rate in each year. And after some time the rates decreases and later the company provides constant rate of dividend in each year. Two stage growth model: In this model Company provides dividend to its shareholders at high rate in each year. And after some time company provides constant rate of dividend in each year. Formula: Different dividend rate: V = D t *(1+ growth rate) / (1+ k) ^t Constant Growth Dividend Discount Model: = D n / (k – g) Where, D n = dividend amount k = required rate of return g = growth rate v = value of stock Let’s understand this model with an example: Example : XYZ Company declares dividend Rs.1.95 per share. The dividend grows at 5% in each year for 3 years and thereafter the dividend grows at the rate of 2% constantly for infinite period. Find the share price value. The required rate of return is 12%. Solution: ...

  Breadth of market theory : It helps to understand the rise and fall in the prices of major indexes or stocks. It is a technical analysis tool which helps to know the market strength with the help of breadth indicators by using total number of stocks in market to know the stock prices rises or fall in a trading day. Breadth of market rises if the stock prices fall but the major indexes rise.   With the help of breadth of market indicators investors can easily predict the market growth or rise or fall in stocks. It indicates how much stocks advances in respect of decline stocks in market or how much stock volume advances in respect of decline in stock volume in a day.   There are two methods which help to measure the breadth of market: ·         A/D ratio (Advances/Decline ratio) ·         A/D Line (Advances/Declines Line) Both the methods are calculated on daily basis. Advances/Declin...

Hello everyone, Happy New Year to all of you Today I am going to tell you what are EPS, EPF and NPS? Both EPS and NPS are pension schemes. EPF and EPS both are for salaried people. In EPF both employer and employee contribute some percentage of amounts from employee basic pay while in EPS only employer contributes.     EPS: It is a retirement saving scheme and the full form of EPS is Employees pension scheme. Under this scheme the employer has to contribute 8.33% of an employee’s basic pay plus dearness allowances. The basic pay will be Rs. 15,000 of an employee. It does not matter if actual basic pay is more than 15, 000 the employer’s contribution is calculated on 8.33% of Rs.15, 000. Employees get pension income when a person will attain the age of 58 years and must complete 10 years of services or 50 year of age for early pension. Employees don't contribute on his pension scheme like EPF (Employees provident fund) and in this scheme no interest is given on...