Market model - methods of computing cost of capital, Finance Basics

Market Model - Methods of Computing Cost of Capital

This model is utilized to establish the percentage cost of ordinary share capital cost of equity (Ke). If an investor is holding ordinary shares, so he can obtains returns in two (2) forms:

  1. Dividends
  2. Capital gains

Capital gain is assumed to constitute the difference between the buying price of a share at the beginning of the (P0), the selling price of the same share at the end of the period (P1).  Therefore total returns = DPS + Capital gains = DPS + P1 - P0.

The amount invested to derive the returns is equal to the buying price at the beginning of the period (P0) therefore percentage return/yield =

(Total returns/Investment) x 100 = DPS + (P1 - P0)/P0 x 100

Posted Date: 1/30/2013 4:07:42 AM | Location : United States







Related Discussions:- Market model - methods of computing cost of capital, Assignment Help, Ask Question on Market model - methods of computing cost of capital, Get Answer, Expert's Help, Market model - methods of computing cost of capital Discussions

Write discussion on Market model - methods of computing cost of capital
Your posts are moderated
Related Questions
Inventory Management - Supply Chain Management Determination of the best ordering policy in a manufacturing organisation In a manufacturing organisation, procurement may ha

Price Earnings Ratio Valuation P/E ratio is traditionally employed for valuation of shares however it is an important ratio in the valuation of business. The P/E ratio is the

Commercial Bank for Short Term Loans Purpose Why Commercial Banks Prefer To Lend Short Term Loans a) Long-term forecasts are not only difficult although also vague as unc

A+/A1 It is one of the top ratings that a ratings agency allots to an issuer or insurer. This rating indicates that the security or carrier has steady financial backing and ple

Task: Decide upon 2 mutual exclusive projects. Calculate the income statement, balance sheet, and statement of cash flows for all year Calculate the NPV, IRR, and

The director of capital budgeting for a firm has identified two mutually exclusive projects, A and B, with the following expected net cash flows: Expected Net Cash Flows Year

#what is an interest?

Marginal cost of finance This is cost of new finances or additional cost a company has to pay to raise and use additional finance is given by: (Total cost of marginal finan

Obtain a copy of a Comprehensive Annual Financial Report (CAFR) for a state or local government for which you would have an interest. Answer the following questions regarding that

Solutions to the conflict - Relationship between Auditors and Shareholders 1. Firing The auditors may be detached from office at the AGM via the shareholders. 2. Lega