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The
The cost of common equity is the cost for investment in the common equity shares of the company and it will be representative of the risk of the equity share holders for investing in the company. The cost of common equity is generally the highest among all the other forms of capital because of highest market risk associated with investment.
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- What are two ways to determine the cost of equity?What are the different types of equity capital? Give some examples?5. BAC Co. and YXZ Co. are identical firms in all respects except for their capital structure. BAC is all equity financed with $800,000 in stock. YXZ uses both stock and perpetual debt; its stock is worth $400,000 and the interest rate on its debt is 10 percent. Both firms expect EBIT to be $95,000. Ignore taxes.
