What does the cost of equity represent for a firm?
AInterest paid on bank loans
BDividend tax paid by firm
CFace value of issued shares
DReturn owners demand for risk
Answer & Solution
Correct answer: D. Return owners demand for risk
It is the return a firm must provide to shareholders to compensate for the risk they take.
Keep practising Dividend Discount Model
Browse all Dividend Discount Model questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
What equity premium did a standard calibrated general equilibrium model predict?Who named the equity premium puzzle in their 1985 study?The equity premium puzzle starts from an observed US premium of roughly what size?How is the equity risk premium defined?As a firm's risk rises, what happens to its cost of capital?Bond yield plus risk premium adds a premium to which rate?A firm's combined cost of debt and equity capital is calculated as what?Why is a firm's cost of equity harder to find than its cost of debt?