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CIMAPRA19-F02-1 Exam - Topic 1 Question 63 Discussion

JJ's current share price is $1.80,with a dividend of $0.20 a share just about to be paid.Dividends have increased at an average annualgrowth rate of 4.5% and this is expected to continue into the future.What is JJ'scost of equity?
A) 17.6%
B) 16.1%
C) 12.5%
D) 11.1%

CIMAPRA19-F02-1 Exam - Topic 1 Question 63 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 63
Topic #: 1
[All CIMAPRA19-F02-1 Questions]

JJ's current share price is $1.80,with a dividend of $0.20 a share just about to be paid.

Dividends have increased at an average annualgrowth rate of 4.5% and this is expected to continue into the future.

What is JJ'scost of equity?

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Suggested Answer: A

by Jerry at Dec 24, 2022, 02:07 PM

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Kina
8 months ago
I agree, 17.6% seems way too high for this.
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Taryn
9 months ago
Surprised the growth rate is only 4.5%!
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Sherita
9 months ago
I think it’s more like 12.5%, not sure about 16.1%.
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Trina
9 months ago
Cost of equity is definitely around 16.1%.
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Cyndy
9 months ago
JJ's share price is $1.80 with a $0.20 dividend.
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Salena
9 months ago
I think I calculated something like 16.1% in a practice problem, but I can’t recall the exact details.
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Hannah
9 months ago
I practiced a question like this where the cost of equity was around 15%. I wonder if it’s close to that here.
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Carole
9 months ago
I’m a bit unsure about the growth rate. Is it 4.5% compounded annually or just a flat rate?
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Howard
9 months ago
I remember we used the Gordon Growth Model for similar questions. I think the formula is something like (D1/P0) + g.
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Chauncey
10 months ago
The item includes determine how and when the serialization process is executed, right? I think that's what option B is referring to. I'll double-check that in my notes to make sure.
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Quiana
10 months ago
Okay, I think I've got this. An l-VPLS is a logical VPLS, which can be associated with multiple B-VPLS, or Bridged VPLS, services. So the answer is A, TRUE.
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