Chapter 13 The Cost of Capital

higher the potential growth rate. The formula is therefore: g = bre. Where re = accounting rate of return or ROCE or ROI. b = earnings retention rate 2.5.4 Example 6. A company is about to pay an ordinary dividend of 16c a share. The share price is 200c. The accounting rate of return on equity is 12.5% and 20% of earnings are paid out as dividends. ................
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