Cost of equity: Difference between revisions
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imported>Doug Williamson (Layout.) |
imported>Doug Williamson (Expand definition.) |
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:(1) the Capital asset pricing model, or | :(1) the Capital asset pricing model, or | ||
:(2) the Dividend growth model. | :(2) the Dividend growth model. | ||
It is the opportunity cost that is primarily relevant for financial decision making purposes. | |||
Even if the dividend policy were to pay no dividends, the issuing company must still grow the capital value of the shareholders' investment. | |||
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* [[Dividend growth model]] | * [[Dividend growth model]] | ||
* [[Equity]] | * [[Equity]] | ||
* [[Opportunity cost]] | |||
* [[Weighted average cost of capital]] | * [[Weighted average cost of capital]] | ||
[[Category:Corporate_finance]] | [[Category:Corporate_finance]] | ||
Revision as of 11:59, 30 May 2021
(Ke).
The rate of return on a company’s net investments financed by equity, which is required to service the providers of the company’s equity capital.
For example 10%.
The cost of equity is often quantified in practice by using either:
- (1) the Capital asset pricing model, or
- (2) the Dividend growth model.
It is the opportunity cost that is primarily relevant for financial decision making purposes.
Even if the dividend policy were to pay no dividends, the issuing company must still grow the capital value of the shareholders' investment.
