Share Valuation
1.0 Introduction
Any shareholder who made an investment to an establishment expects certain returns whether it is in the form of dividend payment or capital growth or both (Ahn & Leung, 2006). In an efficient market, investors (both existing and potential) are assumed to perceive investment risk to commensurate with the required level of return. They will use available information about the future plans of the company to formulate their expectations about future dividends (Ohlson and Juettner-Narouth, 2005)and capital growth. Thus, the cost of equity is equivalent to the rate of return which investors expect to gain on their equity holdings in relation to the level of risk involved.
On the other hand, the most common reason to have a company or share valuation by investors is when a company requires to raise new funds. New funds raised can then be channelled to either establish a new company, expansion of current operations or undertake a project. A company might raise new......
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