Page 34 - FINAL CFA SLIDES DECEMBER 2018 DAY 11
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Session Unit 10:

                                                                                                      36. Cost of Capital


         LOS 36.h: Calculate and interpret the cost of equity capital using the capital asset pricing model approach,
         the dividend discount model approach, and the bond-yield-plus risk-premium approach., p.47













                                                         tanties







                                                                Example: Estimating k using the dividend discount model, p.48:
                                                                                          ce
                                  May need to                   Suppose Dexter’s stock sells for $21, next year’s dividend is expected to
                                  solve for this, or any!       be $1, Dexter’s expected ROE is 12%, and Dexter is expected to pay out
                                                                40% of its earnings. What is Dexter’s cost of equity?
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