Return on Equity (ROE) calculates the yield of a project based on dividends paid out to the shareholders. The higher the ROE the better, but as previously mentioned, the expected ROE will vary depending on the sector and financier (see Box 3 - 8).
| Box 3 - 8
| |||||
| Period | 0 | 1 | 2 | … | 10 |
|
|
|
|
|
|
|
| Equity contribution | -£21,150,000 | £0 | £0 |
| £0 |
| Dividend distributions | £0 | £1,669,156 | £1,366,085 |
| £9,051,911 |
| Cash Available for distribution | -£21,150,000 | £1,669,156 | £1,366,085 |
| £9,051,911 |
|
|
|
|
|
|
|
| Discount Rate | 9.56% | 9.56% | 9.56% |
| 9.56% |
| Present Value of Cash Distributions | -£21,150,000 | £1,517,414 | £1,128,996 |
| £3,489,904 |
| Net Present Value of Cash Distributions | £25,179,619 |
|
|
|
|
| 19.05% |
|
|
|
| |
|
|
|
|
|
|
|
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