Monday 27 April 2015

Cost of Equity Concept

Cost of Equity Concept

Cost of equity is the required rate of return by the equity holder. Equity holder makes investment for return and they have an expectation of return. This expectation or desire is known as cost of equity. Cost of equity can be calculated by the following methods.

1.       Dividend Valuation Model
2.       Capital Asset Pricing Model (CAPM)