The following three parameters to estimate a firms cost of equity:
1. The risk free rate
2. The market risk premium
3. The beta of the firms share
The equity cost of capital
a.
the tax rate charged by the govenment when an equity investor decides to sell a stock.
b.
the tax rate charged by the goverment on dividend payments.
c.
the return that a firm must offer on its stock to compensate equity investors for bearing risk.
d.
is the interest rate that banks charge publically traded firms to borrow financial capital.
