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How to do this problem

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Screenshot_20200911-110356_Office.jpg Kanaga Mani

CA Inter

2K+

13-Sep-20

80

Here realised yield approach has been used for calculating cost of equity. Firstly we should calculate yield for each year. Then mean should be calculated in respect of yields of different years. Yield or cost of equity in realized yield approach Is = {(Dividend + closing market price of share)/(opening market price of share)} Mean may be arithmetic mean(simple average) or Geometric mean = nth root of product of n terms. It shows the average yield of an equity share or cost of equity( that is expectation of shareholder). Hope it helps!!! CA Inter

850

13-Sep-20

Yield = {(Dividend of the year + closing market price of share )/ (opening market price of share) } - 1. CA Inter

850

13-Sep-20

Wealth ratio = (dividend + closing market price)/opening market price. Mean should be taken for wealth ratio and then it should be subtracted by 1 to get cost of equity. 