What will be the cost of equity for Brian Computers

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Question - Brian Computers PLC is listed on the Alternative Investment Market (AIM) at the London Stock Exchange. The current market price of their shares is £80 per share. Last year they paid a dividend of £4 per share. This year they plan to pay £4.20 and expect the dividend to grow by 1.39% in the foreseeable future as it did between last year and this year. The finance director of Brian Computers has also collected some information from the market that suggests the treasury rates in the United Kingdom are currently 1.5 percent and the market return is estimated to be 9.5 percent. His calculations also suggest that Brian Computers has a beta of 0.9.

Required - What will be the cost of equity for Brian Computers using:

a. the Constant Dividend Growth Model?

b. the Capital Asset Pricing Model?

Reference no: EM133079807

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