How do you calculate the cost of equity?


2 Answer(s)


Cost of equity, Ce= Rf + Beta*(Rm-Rf)
where,
Rf= Risk free rate
Rm= Market return
Beta= measure of volatility of stock of company
Beta*(Rm-Rf)is called excess market premium

Cost of equity is the u need to pay all your borrower in current market price .here we put aside the money we take from bank.so if x is risk free rate and y is current mad here we take beta as cofficien of volatility of market.
then we have cost of equity= x+beta(y-x).