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Cost of Equity Formula

   

Added on  2022-08-22

9 Pages509 Words18 Views
Estimating
Capital
Costs
Cost of Equity Formula_1
Cost of Capital
It is the cost of the firm’s funds weather it is debt and
equity.
This cost of capital also states the opportunity cost of
making a specific investment.
It also helps to estimate the rate of return which is
earned by investing the same amount of money on
different investment areas (Pant, 2019).
Cost of Equity Formula_2
Estimation of Capital Cost
The cost of capital has been evaluated with the
formula of:
Cost of Capital= Cost of Debt + Cost of
Equity
Cost of Debt= Interest Expenses x (1- Tax Rate)
Cost of Equity= Risk-Free Rate of Return +
Beta * (Market Rate of Return - Risk-Free Rate
of Return)
(Wallstreet Mojo, 2019).
Cost of Equity Formula_3

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