Walter's and Gordon's Model

Question 1 of 13

1

Total earnings = 1,00,000; No of equity shares = 1,00,000 of Rs.10 each; Price Earning Multiple = 8 times. What is the optimum payout ratio assuming 100% payout ratio?

Select one of the following:

0%
100%
Indifferent

Explanation

Question 2 of 13

3

Profit before Tax = 10,00,000; Tax Rate = 50%; No of shares of Rs.10 each =50,000; 10% Preference capital = 10,00,000; Reserves and Surplus = Rs.45,00,000; Fictitious assets = 10,00,000. How much is ROE?

Select one of the following:

80%
8%
40%
10%

Explanation

Question 3 of 13

3

The company has paid out Dividend of Rs.3 per share based on payout ratio of 50%. Earnings and Dividend will grow at 20 percent for four years. Growth will fall to 10 percent in year 5 and dividend payout ratio will increase to 60%. Cost of equity of the company is 20%. What should be the MPS at the end of year 5?

Select one of the following:

Rs.90.30
Rs.75.20
Rs.82.10
Rs.68.40

Explanation

Question 4 of 13

1

Investors's required rate of return is ___________________?

Select one of the following:

Cost of equity
Return on equity
Internal Rate of Return

Explanation

Question 5 of 13

2

EPS = Rs.10; Payout ratio = 25%; Cost of equity = 10%; Return on equity = 5%. What is the price of share as per Walter's model?

Select one of the following:

Rs.100
Rs.200
Rs.175
Rs.62.50

Explanation

Question 6 of 13

2

The current share price is Rs.100. Long term growth of 8% is expected. Company is expected to pay a divided of Rs.4 per share next year. What rate of return does an investor expect?

Select one of the following:

8%
12%
12.32%
4.32%

Explanation

Question 7 of 13

2

Book value per share = Rs.100; DPS = Rs.4; Payout ratio = 25%. How much is ROE?

Select one of the following:

4%
1%
16%
8%

Explanation

Question 8 of 13

2

The company is paying Dividend of Rs.2 per share. Dividends are currently taxable and investor expects return of 10%. Tax rate is 20%. Dividends have now become exempt but due to imposition of DDT dividend is expected to be 1.80. What will be the price before and after imposition of DDT

Select one of the following:

Rs.20 and Rs.18
Rs.16 and Rs.18
Rs.20 and Rs.22.5
Rs.16 and Rs.22.5

Explanation

Question 9 of 13

2

EPS (100% payout) = Rs.10; MPS = Rs.100. The company is fully equity financed. The company plans to do a project Rs.1 Cr at end of year 1. It will generate Rs.21 lacs from year 2 onwards. How much is project NPV?

Select one of the following:

Rs.1.1 Crores
Rs.1 Crores
Negative 79 lacs
None of the above

Explanation

Question 10 of 13

2

Dividend per share is Rs.2. An investor owns 500 shares of company. He wants to continue to earn same amount of dividend income ever year. Dividends will not be paid for next three years. Dividend of year 4 is likely to be Rs.2.50. Growth rate is 7% and cost of equity is 8%. How many shares are to be sold in year 2 to get the minimum amount?

Select one of the following:

4 shares
3 shares
8 shares
5 shares

Explanation

Question 11 of 13

2

IRR of company = 20%;
Investor's required rate of return = 15%
Dividend = Rs.2 per share; EPS = Rs.5 per share. What will be the growth rate?

Select one of the following:

8%
12%
6%
9%

Explanation

Question 12 of 13

2

Return on equity = 20%; Cost of equity = 15%; DPS = 10. What will be the limiting value as per walter's model?

Select one of the following:

50
66.67
88.89
60

Explanation

Question 13 of 13

1

MPS of company = Rs.100; EPS of company = Rs.8; Cost of equity = 10%. What is present value of growth opportunities?

Select one of the following:

80
20
100
50

	Created by Dinesh Jain over 4 years ago

Chartered Accountancy Strategic Financial Management Quiz on Walter's and Gordon's Model, created by Dinesh Jain on 30/10/2019.

Walter's and Gordon's Model

Question 1 of 13

Total earnings = 1,00,000; No of equity shares = 1,00,000 of Rs.10 each; Price Earning Multiple = 8 times. What is the optimum payout ratio assuming 100% payout ratio?

Select one of the following:

Explanation

Question 2 of 13

Profit before Tax = 10,00,000; Tax Rate = 50%; No of shares of Rs.10 each =50,000; 10% Preference capital = 10,00,000; Reserves and Surplus = Rs.45,00,000; Fictitious assets = 10,00,000. How much is ROE?

Select one of the following:

Explanation

Question 3 of 13

Select one of the following:

Explanation

Question 4 of 13

Investors's required rate of return is ___________________?

Select one of the following:

Explanation

Question 5 of 13

EPS = Rs.10; Payout ratio = 25%; Cost of equity = 10%; Return on equity = 5%. What is the price of share as per Walter's model?

Select one of the following:

Explanation

Question 6 of 13

The current share price is Rs.100. Long term growth of 8% is expected. Company is expected to pay a divided of Rs.4 per share next year. What rate of return does an investor expect?

Select one of the following:

Explanation

Question 7 of 13

Book value per share = Rs.100; DPS = Rs.4; Payout ratio = 25%. How much is ROE?

Select one of the following:

Explanation

Question 8 of 13

The company is paying Dividend of Rs.2 per share. Dividends are currently taxable and investor expects return of 10%. Tax rate is 20%. Dividends have now become exempt but due to imposition of DDT dividend is expected to be 1.80. What will be the price before and after imposition of DDT

Select one of the following:

Explanation

Question 9 of 13

EPS (100% payout) = Rs.10; MPS = Rs.100. The company is fully equity financed. The company plans to do a project Rs.1 Cr at end of year 1. It will generate Rs.21 lacs from year 2 onwards. How much is project NPV?

Select one of the following:

Explanation

Question 10 of 13

Select one of the following:

Explanation

Question 11 of 13

IRR of company = 20%; Investor's required rate of return = 15% Dividend = Rs.2 per share; EPS = Rs.5 per share. What will be the growth rate?

Select one of the following:

Explanation

Question 12 of 13

Return on equity = 20%; Cost of equity = 15%; DPS = 10. What will be the limiting value as per walter's model?

Select one of the following:

Explanation

Question 13 of 13

MPS of company = Rs.100; EPS of company = Rs.8; Cost of equity = 10%. What is present value of growth opportunities?

Select one of the following:

Explanation

IRR of company = 20%;
Investor's required rate of return = 15%
Dividend = Rs.2 per share; EPS = Rs.5 per share. What will be the growth rate?