Information indicates that a firm will earn a return on common equity above its cost of equity capital in all years in the future, but its shares trade below book value Those shares must be mispriced True or false ...

Information indicates that a firm will earn a return on common equity above its cost of equity

Question:

Information indicates that a firm will earn a return on common equity above its capital in all years in the future, but its shares trade below book value. Those shares must be mispriced. True or false?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...