DISCUSS the dividend-price approach to estimate cost of equity capital.

In dividend price approach, cost of equity capital is computed by dividing the expected dividend by market price per share. This ratio expresses the cost of equity capital in relation to what yield the company should pay to attract investors. It is computed as: K e = D 1 / P 0 Where, K e = Cost of equity D = Expected dividend (also written as D 1 ) P 0 = Market price of equity (ex-dividend)