Python Exercises for Corporate Finance and Risk Management

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Question: 39

Q: A company does not plow back any earnings and payout all in the form of dividends at 5. if the current price is 40, what is the value of the market capitalization rate?

In this question the company pays out all the earnings in the form of dividends, to get the market capitalization rate we have to divide the current value with the cash flow i.e dividend.

Given: Current value Cash flow (dividend)

  • Define a function with the name "market_capitalization_rate" whick will take two arguments, current value and cashflow(dividend).
  • The signature of the function should be like:

    def market_capitalization_rate(current_price, dividend):

  • Use the following formula to get the value of market capitalization rate.

    Formula: Market Capitalization Rate = Cash flow/ Current Price

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