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Cost of Equity Calculator

LAST UPDATE: August 24th, 2018

Calculator

What is the Cost of Equity?

The cost of equity represents the compensation the market demands in owning the stock.

Formula

Cost of Equity = Growth Rate of Dividends + (Dividends per Share / Current Market Value of the Stock)

Example

A company has dividends per share of $1.50, current market value of $20 per share, and a dividend growth rate of 2.75%.

Cost of Equity = 2.75% + (($1.5 / $20) x 100%) = 2.75% +(0.075 x 100%) = 2.75% + 7.5% = 10.25%

Therefore, this company has a cost of equity of 10.25%.

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