{"id":105291,"date":"2021-02-01T13:29:29","date_gmt":"2021-02-01T07:59:29","guid":{"rendered":"https:\/\/www.vskills.in\/certification\/tutorial\/?page_id=105291"},"modified":"2024-04-12T14:28:31","modified_gmt":"2024-04-12T08:58:31","slug":"cost-of-external-equity","status":"publish","type":"page","link":"https:\/\/www.vskills.in\/certification\/tutorial\/cost-of-external-equity\/","title":{"rendered":"Cost of External Equity"},"content":{"rendered":"\n<p>The firm\u2019s external equity consists of funds raised externally through public or rights issues. The minimum rate of return, which the equity shareholders require on funds supplied by them by purchasing new shares to prevent a decline in the existing market price of the equity share, is the cost of external equity.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"http:\/\/www.vskills.in\/lms\/wp-content\/uploads\/2016\/06\/Image-106.jpg\" alt=\"Image 106\" class=\"wp-image-40505\"\/><\/figure><\/div>\n\n\n\n<p>The minimum rate of return, which the equity shareholders require, on funds supplied by them by purchasing new shares to prevent a decline in the existing market price of the equity share is the cost of external equity. The firm can induce the existing or potential shareholders to purchase new shares when it promises to earn a rate of return equal to:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" src=\"http:\/\/www.vskills.in\/lms\/wp-content\/uploads\/2016\/06\/Image-107.jpg\" alt=\"Image 107\" class=\"wp-image-40506\"\/><\/figure><\/div>\n\n\n\n<p>Where 10 is the issue price of new equity. The cost of required earnings will be less than the cost of new issue of equity if P0 &gt; I <sub>0<\/sub> .<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The firm\u2019s external equity consists of funds raised externally through public or rights issues. The minimum rate of return, which the equity shareholders require on funds supplied by them by purchasing new shares to prevent a decline in the existing market price of the equity share, is the cost of external equity. The minimum rate&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-105291","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Cost of External Equity - Tutorial<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.vskills.in\/certification\/tutorial\/cost-of-external-equity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Cost of External Equity - Tutorial\" \/>\n<meta property=\"og:description\" content=\"The firm\u2019s external equity consists of funds raised externally through public or rights issues. 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