Which of the following describes the cost of equity?

The cost of equity refers to the return that a company must earn on its equity investments to satisfy its shareholders. This cost is represented by the expectations of the shareholders regarding returns from their investment, often manifested in the form of dividends or capital gains.

Ownership dilution occurs when a company issues more equity shares, effectively reducing the ownership percentage of existing shareholders, which can impact their returns. Cash expenses due to dividends represent the actual payout of profits to shareholders and are a direct cost of having equity financing. Both collectively represent the costs associated with financing through equity rather than through debt.

The other options do not accurately characterize the cost of equity. Interest expenses pertain to the cost of debt financing, fixed payments to suppliers relate to operational costs, and costs for purchasing company assets involve capital expenditures rather than costs associated with equity financing. Therefore, option B encapsulates the essence of the cost of equity by highlighting the potential drawbacks of equity financing for a company's current owners.