Question
Download Solution PDFThe market price per share of a company is Rs. 125. The dividend per share (DPS) is Rs 12 and DPS is expected to grow at a constant rate of 8% per annum. The cost of the equity capital to company will be
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFConcept:
\(Cost\;of\;equity = \frac{{DP}}{{MPS}} + r\)
Calculation:
Given:
Market price per share = Rs 125, Dividend per share = Rs 12, Rate = 8 % = 0.08
Now,
\(Cost\;of\;equity = \frac{{DP}}{{MPS}} + r\)
\(\therefore Cost\;of\;equity = \frac{{12}}{{125}} + 0.08\)
∴ Cost of equity = 0.096 + 0.08 = 0.176
Thus, the cost of equity = 17.6%
Last updated on May 28, 2025
-> UPSC ESE admit card 2025 for the prelims exam has been released.
-> The UPSC IES Prelims 2025 will be held on 8th June 2025.
-> The selection process includes a Prelims and a Mains Examination, followed by a Personality Test/Interview.
-> Candidates should attempt the UPSC IES mock tests to increase their efficiency. The UPSC IES previous year papers can be downloaded here.