BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Reserve
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Calculating capital structure
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Depreciation
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calculating Cost of Equity Share Capital
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Detailed explanation-1: -Therefore, it can be used in calculating the cost of equity capital.
Detailed explanation-2: -Estimate the cost of equity by dividing the annual dividends per share by the current stock price, then add the dividend growth rate. In comparison, the capital asset pricing model considers the beta of investment, the expected market rate of return, and the Rf rate of return.
Detailed explanation-3: -For the cost of equity for WACC calculation, one must use the formula: Cost of equity = Risk-free rate of return + Beta * (market rate of return – a risk-free rate of return).
Detailed explanation-4: -Cost of capital refers to the cost a company is required to pay to raise more funds. However, the cost of equity is the rate of return that an investor expects to receive from their investment. The cost of capital formula actually includes both the cost of equity and the cost of debt.