Equity shares of ABC Ltd. are currently selling at 100. The company is expected to pay a dividend of 5 per share with a growth rate of 10%. Compute the cost of equity - Ke.
a) Ke = 10%
b) Ke = 20%
c) Ke = 23%
d) Ke = 15%
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Dividend yield is the financial ratio that measures the quantum of cash dividends paid out to shareholders relative to the market value per share. It is computed by dividing the dividend per share by the market price per share and multiplying the result by 100. A company with a high dividend yield pays a substantial share of its profits in the form of dividends. Dividend yield of a company is always compared with the average of the industry to which the company belongs.
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