Raj Ltd. is currently earning Rs. 2,00,000 and its share is selling at a market price of Rs. 160. The firm has 20,000 shares outstanding and has no debt. The earnings of the firm are expected to remain stable, and it has a payout ratio of 100%. What is the cost of equity? If the firms earns 15% rate of return on its investment opportunities then what would be the firms cost of equity if the payout ratio is 60%? (Ans. (i) When the payout ratio is 100%, 12.5% (ii) When the payout ratio is 60%, 13.5%)