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Sir, I don’t quite understand the difference between shareholders required return and the cost of equity to the company . Is there any major difference?
There is no difference whatsoever – they are the same thing. The return required by shareholders is what the company has to pay.
For debt borrowing the cost to the company is different from the investors required rate of return due to tax relief on the interest, but this does not apply to equity borrowing.I do suggest that you watch my free lectures on this (and if necessary the relevant Paper FM lectures, because the cost of capital is revision from Paper FM).
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