Insert the information in the form and the calculator will determine the cost of equity.

What is the cost of equity?

The cost of equity is the rate of return that the investor requires from an equity investment for the investment to be worth the risk and time.

How to calculate cost of equity?

To calculate cost of equity you should use the following formula:
cost of equity = (next years dividends per share / current market value of stock) + growth rate of dividends

example: Company x will pay a dividend worth of $6 in the next year, the current market value per share is $32 and the dividends are expected to grow by 10%, calculate the cost of equity?

Using the cost of equity formula the asnwer will be like this:

cost of equity = (next years dividends per share / current market value of stock) + growth rate of dividends
cost of equity = ($6 / $32) + 0.1
cost of equity = 0.28

Why use cost of equity?

Investors use the cost of equity to measure the rate of return from investing in equity in order to decide if the investment is worth the risk and time or not.