Introduction to cost of capital and cost of equity 1

Question 1

What is the cost of equity?

Answer 1

The return that investors holding shares in a firm require (return for them, cost for firms)

Question 2

In what way is the total pay out model better than the dividend growth model?

Answer 2

• It takes into account share repurchases

- SR important because they reduce the amount of cash and decrease share count (EPS, DPS)