Calculating the Cost of Equity Suppose equity in Watta plc has a beta of 0.80. The market

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Calculating the Cost of Equity Suppose equity in Watta plc has a beta of 0.80. The market risk premium is 6 per cent, and the risk-free rate is 6 per cent.

Watta’s last dividend was £1.20 per share, and the dividend is expected to grow at 8 per cent indefinitely. The equity currently sells for £45 per share. What is Watta’s cost of equity capital?

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Ali Khawaja

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