Calculate the cost of equity for a firm whose share price in Rs.120. The dividend at the end of year is expected to be Rs 9.72/Share and growth rate is 8%.

Question – Calculate the cost of equity for a firm whose share price in Rs.120. The dividend at the end of year is expected to be Rs 9.72/Share and growth rate is 8%.

भारित औसत पूंजी लागत क्या है? भारित औसत पूंजी लागत का उपयोग करने के औचित्य की जांच कीजिए।
IGNOU ASSIGNMENT

Solution: Cost of Equity using Dividend Price Ratio Method:

Ke = (D1/P0) + g
Where, D1 = Dividend Per Share at the end of period
P0 = Market Price per Share in the beginning of period
g = Growth Rate
Given: D1 = 9.72 ; P0 = 120 ; g = 8%
Putting the values in the above formula:
Ke = 9.72/120 + 0.08
= 0.081 + 0.080
= 0.161 or 16.10%

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1 Response

  1. 2018

    […] ASSIGNMENT Calculate the cost of equity for a firm whose share price in Rs.120. The dividend at the end of year… […]

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