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  • Stock A Year 1 Year 2 Year 3 Year 4 Walters Model

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    urmila rana
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    This document compares the internal rate of return (IRR) of two stock investments, Stock A and Stock B, over a four year period. Stock A pays dividends of $20 each in years 2 and 3, and is worth $140 at the end of year 4, yielding an IRR of 30%. Stock B does not pay dividends, but is worth $200 at the end of year 4, yielding an IRR of 26%. The document also includes the Walters model, which is used to calculate IRR.

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    Account and finance 2 IMT

    Original Title

    Why+do+Companies+Pay+Dividends_ (2)

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    This document compares the internal rate of return (IRR) of two stock investments, Stock A and Stock B, over a four year period. Stock A pays dividends of $20 each in years 2 and 3, and is worth $140 at the end of year 4, yielding an IRR of 30%. Stock B does not pay dividends, but is worth $200 at the end of year 4, yielding an IRR of 26%. The document also includes the Walters model, which is used to calculate IRR.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    7 views2 pages

    Stock A Year 1 Year 2 Year 3 Year 4 Walters Model

    Uploaded by

    urmila rana
    This document compares the internal rate of return (IRR) of two stock investments, Stock A and Stock B, over a four year period. Stock A pays dividends of $20 each in years 2 and 3, and is worth $140 at the end of year 4, yielding an IRR of 30%. Stock B does not pay dividends, but is worth $200 at the end of year 4, yielding an IRR of 26%. The document also includes the Walters model, which is used to calculate IRR.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Stock A Year 1 Year 2 Year 3 Year 4 WALTERS MODEL

    Cost of purchase -100 Assumptions


    Dividend 20 20 20 D
    Value at end of investment period 140 R
    Net Cash flow -100 20 20 160 K
    E
    IRR 30% D PER SHARE

    P
    Stock B Year 1 Year 2 Year 3 Year 4
    Cost of purchase -100
    Dividends 0 0 0
    Value at end of investment period 200
    Net Cash flow -100 0 0 200

    IRR 26%

    128.75
    1 2 3 4

    0% 20% 40% 100%


    12% 12% 12% 12%
    10% 10% 10% 10%
    50 50 50 50
    50 10 20 50

    580 560 500

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