CL ratio
Cygnus has a
dividend cover ratio
of 4.0 times and expects
zero growth in dividends. The company
has one million $1 ordinary shares
în issue and the market capitalization of
the
company
is $ 50 million
After tax profits for next year is expected to be $20 million. What is the cost of equity capital?
​

The cost of equity is "10.00%".

Explanation:

The given values are:

After tax profits,

= $20 million

Number of shares,

= 1 million

Dividend cover ration,

= 4.0

Market capitalization,

= $50 million

Now,

The earning per share (EPS) will be:

=

On substituting the values, we get

=

= ($)

The dividend cover ratio =

On substituting the given values, we get

⇒                                  

⇒            

⇒                                         ($)

Market per share price will be:

=

=

= ($) per share

So,

The cost of equity capital will be:

=

On putting the values in the above formula, we get

=

=

= i.e., %

answer; it can vividly demonstrate product attributes and persuasively explain their corresponding consumer benefits;

answer(d) all of the choices are correct;