Earning Price Approach:
Cost of equity determines the market price of the shares. It is based on the future earning prospects of the equity. The formula for calculating the cost of equity according to this approach is as follows.
Ke = E / Np
Where,
Ke = Cost of equity capital
E = Earning per share
Np = Net proceeds of an equity share
Cost of equity determines the market price of the shares. It is based on the future earning prospects of the equity. The formula for calculating the cost of equity according to this approach is as follows.
Ke = E / Np
[Post Image Courtesy of CoolDesign at FreeDigitalPhotos.net]
Where,
Ke = Cost of equity capital
E = Earning per share
Np = Net proceeds of an equity share
Earning Price Approach
![Earning Price Approach]()
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