18. Cost of equity (S4.5) Each of the following formulas for determining shareholders’ required rate of return can be right or wrong depending on the circumstances:

a. r = DIV1/ P0 + g

b. r = EPS1/ P0 For each formula, construct a simple numerical example showing that the formula can give wrong answers and explain why the error occurs. Then construct another simple numerical example for which the formula gives the right answer.