Which one of the following is  not a method of calculating cost of equity capital?

Correct option is C

The correct answer is (c) Yield to maturity method.
The Yield to Maturity (YTM) is a method used to calculate the cost of debt (specifically bonds or debentures), not equity. It represents the total internal rate of return earned by an investor who buys a bond at its current market price and holds it until it matures. In contrast, the cost of equity (ke) is calculated using methods that reflect the returns expected by shareholders, such as dividends or earnings generated by the firm.
INFORMATION BOOSTER
· Dividend Yield Method: Calculates based on the ratio of dividends per share to the current market price.
· Dividend Plus Growth (Gordon Model): Factors in the expected constant growth rate {g} of dividends, expressed as .
· Earnings Yield Method: Used when a firm retains all earnings; it relates Earnings Per Share (EPS) to the market price.
· Equity Expectation: Unlike debt, equity has no maturity date, which is why a "maturity" based yield is inapplicable.
ADDITIONAL KNOWLEDGE
· (a) is incorrect because it is a standard approach for firms with stable dividend policies.
· (b) is incorrect because the constant growth model is the most widely used formula for equity valuation in finance.
· (d) is incorrect because the earnings-price ratio is a recognized method for estimating the required rate of return for investors.