Watching this resources will notify you when proposed changes or new versions are created so you can keep track of improvements that have been made.
Favoriting this resource allows you to save it in the “My Resources” tab of your account. There, you can easily access this resource later when you’re ready to customize it or assign it to your students.
The cost of equity is broadly defined as the risk-weighted projected return required by investors on a company's equity in order to compensate investors for the risk they undertake. While a firm's current cost of debt is relatively easy to determine from observation of interest rates in the capital markets, its current cost of equity is unobservable and must be estimated. The cost of equity can be estimated by comparing the investment to other investments with similar risk profiles. Estimates are also commonly calculated using the capital asset pricing model (CAPM).
Source: Boundless. “The Cost of Common Equity.” Boundless Finance. Boundless, 21 Jul. 2015. Retrieved 11 Feb. 2016 from https://www.boundless.com/finance/textbooks/boundless-finance-textbook/introduction-to-the-cost-of-capital-10/valuing-different-costs-88/the-cost-of-common-equity-377-8725/