Describe cost of equity shares

Question

Briefly describe cost of equity shares? And also write down way to evaluate the cost of equity shares?

Answer 1

Cost of equity share is the division of cost of capital that permits the payment to only the equity shareholders. Within this every shareholders get the shares for getting the return on the shares on that they are investing so much. From company's viewpoint the company should earn more than cost of equity capital so as to be unaffected by the market value of the shares of its.

To evaluate the cost of equity shares we have to follow the subsequent way:-

i) Price ratio method or Dividend yield method

In this the least rate of cost of equity shares will be equivalent to the “current value of prospect dividend per share with present price of a share”.

Cost of equity shares= Dividend per equity/ Market price