By how much overall has the purchasing power of your original EUR 50,000 changed?
You buy shares in a publicly traded company for EUR 50,000.
You hold them for five years.
Over the five years the EPS increases by an average of 5% per year, and the PE goes up 20%.
You receive the following dividends
End year 1 EUR 100 when inflation was 3%
End year 2 EUR 150 when inflation was 4%
End year 3: EUR 200 when inflation was 2%
End year 4: EUR 160 when inflation was -2%% (deflation)
End year 5: EUR 200 when inflation was 3%
You reinvest the dividend at 3% compounded annually.
After the five years, you sell the shares. What is your cash position from this operation? (Ignore tax effects.)
By how much overall has the purchasing power of your original EUR 50,000 changed?
