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I haven’t understood what they have done to calculate the cost of equity in appendix one.
How have they got the share price for the P0=D0(1+G)/(re-G), as 1.
The dividend yield is 3.1% (not 3.1c).
So use any figure you want for Po. The dividend will be 0.031 x Po and the answer will end up the same.
Using Po = 1 (and therefore dividend of 0.031) is the easiest numbers, but try Po = 2 (and therefore dividend is 0.062) and the answer will be exactly the same.
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