The cost of equity capital equals the dividend yield minus the growth rate in dividends for a constant dividend growth stock.

Question

Quizplus · Accepted Answer

The cost of equity capital is calculated using various methods, such as the Capital Asset Pricing Model (CAPM). The formula for the CAPM is as follows: Cost of Equity Capital = Risk-Free Rate + Beta x (Market Return - Risk-Free Rate). The growth rate in dividends may be used in determining the expected future dividends, but it is not the sole determinant of the cost of equity capital.

The Cost of Equity Capital Equals the Dividend Yield Minus