• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

TSR

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › TSR

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 1, 2021 at 4:24 pm #633813
    Natasha1996
    Member
    • Topics: 34
    • Replies: 22
    • ☆☆

    Cost of Equity and Cost of Debt is a cost of raising the finance by equity or debt but it actually a required return to shareholders?

    As compared to cost of equity and cost of debt what is actually TSR (Total shareholder return)? I know that it takes the dividend + change in share price over the year.

    What is the difference between Cost of Equity and TSR? And am I correct about what I mentioned above?

    September 1, 2021 at 7:01 pm #633845
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    The cost of equity and debt are relevant for calculating the WACC so that we can appraise projects.

    The shareholders required rate of return is determined by looking at their expectations of future dividends.

    The total shareholder return is looking at what their return was over the past year. That may not be the return that they require in the future.

    September 1, 2021 at 8:53 pm #633879
    Natasha1996
    Member
    • Topics: 34
    • Replies: 22
    • ☆☆

    1) BUT is it correct that the cost of equity & debt is a cost to a company but it is a required return to investors??

    2) Is there any effect on the risk-free rate and market premium in the CAPM model if there is an increase in the prevailing interest rate?

    3) Is there any inclusion of tax in the CAPM model?

    September 2, 2021 at 7:30 am #633915
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    1. The cost of equity to the company is the same as the shareholders required rate of the return. The cost of debt to the company is not the investors required rate of the return – the cost to the company is lower because of the tax relief on the debt interest.

    2. If interest rates increase then the risk free rate will be higher and so will the return from the market.

    3. Not when calculating the cost of equity using the beta. However tax is relevant when gearing and ungearing betas as you can see from the formula.

    All of this is explained in my free lectures. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • daliuske on Financial management objectives – ACCA Financial Management (FM)
  • ksmigulec on Management of Working Capital  – Introduction – ACCA Financial Management (FM)
  • tmatanga2008@gmail.com on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)
  • John Moffat on Capital asset pricing model (part b) – ACCA Financial Management (FM)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy