Barry has cash to invest and is considering purchasing ordinary shares in Hurst Ltd. The company just paid a dividend of $2.00 per share to its shareholders. The dividend is expected to grow at the rate of 4% per year indefinitely. Barry's required rate of return from this investment is 15% per annum. Shares in Hurst Ltd are currently selling for $20.00. (a) the value of one share in Hurst Ltd. (b) Would you recommend an investment in Hurst Ltd? (c) Separate to (a) and (b), assume Barry buys shares in Hurst Ltd when they trade for $19.00 per share. Immediately after Barry buys shares in Hurst Ltd, the company announces a 2 for 1 share split. As a result of the share split (and assuming no value relevant information is released) explain what happens to the share price and the value of Barry's investment in Hurst Ltd.

Answer rating: 100% (QA)

a To calculate the value of one share in Hurst Ltd we can use the dividend discount model DDM The DD... View the full answer