All of the following methods may be used to determine the cost of equity capital (k_e) for a non-dividend-paying stock EXCEPT ____.

Question

Quizplus · Accepted Answer

The simulation with growth expectations approach cannot be used to determine the cost of equity capital for a non-dividend-paying stock because it relies on growth expectations, which are not applicable to non-dividend-paying stocks. The other options, risk premium on debt approach, CAPM approach, and comparing with similar dividend-paying stocks in the industry, can all be used to determine the cost of equity capital for non-dividend-paying stocks.

All of the Following Methods May Be Used to Determine