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Cost of Equity

   Also found in: Acronyms, Wikipedia 0.01 sec.
Cost of equity
The required rate of return for an investment of 100% equity.

Cost of Equity
The required rate of return that a stockholder demands from a publicly-traded company in exchange for buying a share and assuming the risk associated with it. It is calculated thusly:

Cost of Equity = ( Dividends per share / Price per share ) + Dividend growth rate.


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The weighty issue is that students must be able to calculate the cost of equity and the cost of debt.
Emphasizing the cost of equity capital, the text aims for wide breadth in covering the cost of capital for uses in business valuation, project assessment and capital budgeting, divisional cost of capital, reporting unit valuation and goodwill impairment testing, transfer pricing, utility and other regulated industry rate setting, and ad valorem (property) taxation.
 
 
 
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