In computing the cost of common equity,if D₁ goes downward and P_o goes up,K_e will:

Question

Quizplus · Accepted Answer

D₁ (the dividend expected by shareholders) and P_o (the price at which shares can be sold) both affect the cost of common equity. If the expected dividend goes down and the stock price goes up, it indicates that the yield on the stock has decreased. This means that investors are willing to pay more for the same amount of dividends, reducing the cost of common equity. Therefore, K_e will go down.

In Computing the Cost of Common Equity,if D1 Goes Downward

In Computing the Cost of Common Equity,if D₁ Goes Downward