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LekaFEV [45]
3 years ago
10

Assume that Kish Inc. hired you as a consultant to help estimate its cost of common equity. You have obtained the following data

: D0 = $0.90; P0 = $27.50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of common equity?
Business
1 answer:
Kobotan [32]3 years ago
8 0

Answer:

Cost of equity= 10,50%

Explanation:

The cost of equity is the return a company requires to decide if an iThe cost of equity is the return a company requires to decide if an investment meets capital return requirements. A firm's cost of equity represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership.

Cost of equity= (D1/P0)+g

D1= next year dividend (D0*

P0=actual price

g= growth rate of dividends

In this exercise:

D1=D0*(1+g)=0,90*1,07=$0,963

P0=$27,50

g=0,07

Cost of equity= 0,963/27,5+0,07=0,1051=10,50%

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In this question, we have to compare the cost so that the net income or net loss would be calculated.

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_______ data would be useful for creating a report containing last year's revenue, which won't be changing.
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