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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › cost of equity
Dear John Moffat, there is a question I need your help.
ABC Co has paid the following dividends per share in recent year:
year……………………………………2013………2012………..2011……….2010
Dividend(cents per share)………36.0……….33.8………..32.8………….31.1
The dividend for 2013 has just been paid and the market value per share is $ 5.40
What is the cost of equity?
the answer is like that g= 36./31.1-1=0.05 or 5%, but it didn’t equal 0.05, I am using 31.1x (1+g)^3=36, g=0.04997, do you think it should be used like this way?
many thanks
What you have done is correct. g = 0.04998 which is 4.998%
4.998% is close enough to 5% to make no difference 🙂