Its cost of equity capital is: 15.60%
The return a business must obtain in exchange for a certain investment or project is known as the cost of equity. For instance, the cost of equity indicates the return a firm must obtain to justify a new project while deciding whether to take on more finance. Debt and equity financing are the two main methods used by businesses to raise capital. Costs and rates of return vary for each.
Dividend growth rate plus annualised dividends per share equals the cost of equity. Consider a corporation, for instance, that trades at $30 and now pays a quarterly dividend of $0.30 per share ($1.20 per share yearly).
Given that,
Beta = 1.9
risk free rate = 8%
market risk premium = 4%
Thus,
Cost of equity = Risk free rate + (Beta × Market risk premium)
Cost of equity = 8% + (1.9 × 4%)
Cost of equity = 15.60%
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