You are told by your investment advisor that Laduma Co. is expected to earn R5 per share next year, R6 per share the following year and that thereafter earnings are expected to grow by 8 percent per year. The dividend payout ratio is 60 percent and the required rate of return on Laduma shares is 15 percent. If the current share price is R40, would you expect your adviser to make a buy, hold or sell recommendation? If transaction costs are R2,50 per share, would you follow his advice?

Answer rating: 100% (QA)

Question Answer Solution Dividend in Year 1 EPS 1 Dividend Payout Ratio 5 60 3 Dividend in Y... View the full answer