if there is no growth in a firm the return of equity is equal to the dividend yield
Return on equity is influenced by profits and not from dividends.
Dividend on common stock has to be more than dividend on preferred stock because of higher risk involved in equity investments.
return on capital employed (ROCE) is net income/(debt&equity) whereas return on equity is income/equity (without debt).
The cost of equity using the dividend growth model (DGM) is calculated using the formula: ( r = \frac{D_1}{P_0} + g ), where ( r ) is the cost of equity, ( D_1 ) is the expected dividend next year, ( P_0 ) is the current stock price, and ( g ) is the growth rate of dividends. This model assumes that dividends will grow at a constant rate indefinitely. It is commonly used by investors to assess the expected return on equity investments based on future dividend payments.
Return on equity is the rate of returns you earned on your equity investments Return on net worth is the rate at which your entire property is growing (Your net worth is the sum of all your assets - all your liabilities)
relationship between WACC and required rate of return.
dividend....
Dividend yield (return gained on dividend) and capital gains yield (return gained on stock price).
Total equity and common equity are separate things where there is preference shares are also issued in that case only shares issued to common share holders are included in common equity while in total equity shares issued to preference shareholders are also included.
Return on asset= profit margin × asset turnover Return on equity= return on asset × equity multiplier so, return on equity is more comprehensive
We know that, g = br Here, g = growth rate b = retention ratio = (1- dividend pay-out ratio) = (1 - .40) = .60 r = return on equity = .16 So, g = .60 x .16 = .096 or 9.6% (ans)
risk is pre-stage for return...