The earnings, dividends and share price of Khoza Industries are expected to grow at 7% a year. The share sells for R23 per share and its last dividend was R2. a) What is the component cost of equity using the DCF approach? b) If the firm’s beta is 1.6, rRF is 9% and expected return on the market is 13%, what is the firm’s cost of equity using CAPM. c) If the firm’s bonds earn a return of 12%, what will rS be using the bond yield plus risk premium approach. d) On the basis of the results from a) to c), what would you estimate Khoza’s cost of equity to be?

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Lets calculate the cost of equity for Khoza Industries using the three different approaches mentione... View the full answer