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Manag., July-2018 – Q91

0. A firm is currently earning ` 50,000 and it's one share has a present market value of ` 175. It has 5,000 shares outstanding. The earnings of the firm are expected to remain stable and it has a payout ratio of 100%. The cost of equity is:

  • Option : B
  • Explanation :
    Cost of Equity = Reciprocal of P/E Ratio
    = 1/17.5 =5.71%.
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