Walter and Gordon Model Assignment Help

Walter and Gordon Model Assignment Help Online

Walter and Gordon Model assignment help explains the concept of these two important theories that have a special place in the finance domain. These theories are framed to clarify relation between dividend and valuation of a firm. Out of the three major theories explained Walter’s Model, Gordon’s Model and Modigliani and Miller’s Hypothesis.

Introduction to Walter’s Model

This theory was introduced by Professor James E. Walter who presented the idea that choice of dividend policies has a direct impact on the enterprise value. Asper model that he drew and created, it showcases importance of relationship that exists between a company with other significant elements such as IRR (internal rate of return) and cost of capital (denoted as k). these factors together work at assessing the role of a dividend policy to increase the wealth attainment of shareholders. In detailed information students can take take help form BookMyEssay writers. They will be answered your all queries and also provide case study assignment on Walter and Gordon Model subject.

Talks about the Major Assumptions of Walter’s Model

Among these theories, Walter model has bene based on some core assumptions and norms which are discussed below:

• First assumption states that a firm does not access funding from debt or equity and solely depend on its retained earnings for financing all of its investment
• In this model, the IRR (internal rate of return), and cost of capital (k) are set consistent
• These earnings are presumed to be either distributed in the form dividend or are believed to be reinvested within the company itself.
• A firm is belied to have a long or immeasurable existence.
• The common constant factors are beginning earnings and dividends. Other elements that tend to change / fluctuate are values of earnings per share (denoted as E), and divided received per share (denoted as D).

Walter’s Model is drive by formula that helps in determining the market price tagged with each share (denoted as P). The formula is – P = D/K +r(E-D)/K/K

The above given equation denotes that market price per share is totality of sum of the present value of two incomes sources:

• (D/K) is the current value of an unlimited stream of constant dividends
• [r (E-D)/K/K] – this signifies current value of unlimited stream of stream gains.

Explains the Definition and Assumption of Gordon’s Model

Gordon Model is conceptually another better half of the homework and assignment help on Walter and Gordon Model. Developed by Myron Gordon, it is recognised as a popular model which is defined in relation with a firm’s market value to dividend policy. The Gordon’s Model is Widley and exclude applicable to all equity firms. Some of the core assumption enlisted under this model theory are as follows:

• Each firm is recognised as an Equity firm
• A firm has no access to external financing
• As per this model, investors are believed to be unwilling to take risks and are in favour of certain returns over uncertain returns. Also, they are assumed to prefer current dividends to combat the chances of risk (risk being the possibility of not receiving the returns from the investments made).
• It does not factor in the liability of paying corporate taxes
• A firm’s internal rate of return (r) and appropriate discount rate (K) do not change
• The firm and its relationship with its stream of earnings are uninterrupted
• K > br = g is a condition which must be not fulfilled to acquire the exact value of a firm’s share.
• Once the retention ratio (b) is decided, it remains constant. This also indicates that growth rate (g) = br also remain unchanged

As per this Model, a share’s market value is equivalent to current value of its future dividends. Its formula is – P = [E (1-b)] / Ke-br

In this:

• P stands for price of a share
• B signifies the retention ratio
• E denotes earnings per share
• 1-b is that proportion of earnings which are circulated as dividend
• Ke denotes the capitalization rate
• Br is indicative of the growth rate

Walter and Gordon Model assignment writing help also describes the Gordon’s dividend capitalisation model. In this model, a share’s market value (denoted as Pq) remains equivalent to the current value of infinite stream of dividends that is to be expected by the share.

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