Answer
XYZ Company
Cost of Equity
P0 = D0 (1+g) / RE –g
15 = 2 (1.10) / RE – 0.1
15RE - 1.5 = 2.20
15RE = 3.70
RE = 3.70 / 15
RE = 0.2467 or 24.67 %
ABC Company
Cost of Equity
P0 = D0 (1+g) / RE –g
12 = 1.6 (1.05) / RE – 0.05
12RE – 0.6 = 1.68
12RE = 2.28
RE = 2.28 / 12
RE = 0.19 or 19.00 %
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Friday, February 12, 2010
ACCA501GDB Another Solution
Posted by Alisha Naaz at 9:16 AM
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