Cost of equity a Dividend yield method 1

Cost of equity a. Dividend yield method

1. Calculate the cost of equity • Show off ltd issued 1 lakh ordinary shares of Rs. 10 at a discount of 10%. Share issue expenses amounted to Rs. 50, 000. it expected to pay dividend @ 17% for the current year.

• confidence ltd issued 50, 000 equity shares of rs. 10 each at a premium of 20%. The share issued expense are estimated to be 10% of total sale proceeds. Calculate the cost of equity share if the company is planning to declare dividend @ 13. 5% for the current year.

• Wipro india issued 26, 20, 000 equity shares of Rs. 10 each through book building open between nov 2016 to Dec 2016. the price band was Rs 145 -165 after the closure of book running, the cut-off price was fixed at Rs. 150/-. It expected to pay dividend at 100% for the year 2015 -16. if share issue expenses amount to 20% of the cut off price, calculate the cost of equity

• The details of four companies that accessed the primary capital market during 2015 -16 are given below. Calculate cost of equity s. no company FV(Rs. ) Issue Price Issue Estimated expenses ( dividend %) (%) 1 Union Bank 10 10 35 2 Parle G 10 110 20 20 3 Malabar Gold 10 30 20 30 4 Mandovi 10 190 30 40

• A company issues 100 equity shares of Rs. 100 each at a premium of 10%. The company has been paying 20% dividend to equity share holders for past 5 years and expects to maintain the same on the future also. Compute cost of equity shares, will there be any difference