How would you determine the cost of equity. There is know interest rate like you have with a bond, so how do you know what rate to use?
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How would you determine the cost of equity? There is know interest rate like you have with a bond, so how do you know what rate to use?
As per the cbdd, The cost of equity capital is equal to the required rate of return on equity-supplied capital. Hence cost of equity represents the opportunity cost of the shareholders. We will find the rate for cost of equity by using various models. These are described below:
Cost of equity using dividend growth model
AS per Investopedia "DDM demonstrates the underlying principle that a company is worth the sum of ...
The response provides the guidelines to determine the cost of equity.