Walter’s Formula

Walter’s Formula

Prof. James E. Walter has given a mathematical formulation to suggest that financial managers can use dividend policy as financing decision to maximise shareholders, wealth. His model is one of the important theoretical dividend models and helps to illustrate solely by investment opportunity available. His formula is :

D + (r/k)(E-D)

P = K/K

Where, P = Market price per equity share

                D = dividends per share

                E = earnings per share

                R = returns on investment

                K = market capitalization rate for cost of capital)