(1) A share has a current market value of 120c and the last dividend was 10c. If the expected annual growth rate of dividends is 5%, calculate the cost of equity capital.

(2) The risk-free rate of return is 7%. The average market return is 11%.

(a) What will be the return expected from a share whose factor is 0.9?

(b) What would be the share's expected value if it is expected to earn an annual dividend of 5.3c, with no capital growth?

(3) A share has a current market value of 96c, and the last dividend was 12c. If the expected annual growth rate of dividends is 4%, calculate the cost of equity capital.

Answer rating: 100% (QA)

1 To calculate the cost of equity capital we can use the dividend discount model DDM formula Cost of ... View the full answer