Eview S/D 2017 cost of equity

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August 24, 2018 at 1:04 pm #469237
luwennnn
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Dear John

I used the ungeared beta 0.952 calculated ungeared cost of equity 4%+0.952(10%-4%)=9.712%, then use MM proposition 2 formula calculate geared cost of equity 9.712%+0.8(9.712%-8%)(3496/17325)=9.99% however it is different from the answer. Could you please let me know where I did wrong.
August 25, 2018 at 9:42 am #469335
John Moffat
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In your workings you have taken (9.712% – 8%), but you should have taken (9.712% – 4%)
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