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Cost of Equity

MediumFinance & Accounting00:00
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Problem

How do you find the cost of equity?

Asked in the Accounting Exam stage. This appeared in the written short-answer section of the accounting exam.

Question / Task

  1. State the standard method for calculating the cost of equity.
  2. Define each required input and explain how the result is used in valuation.
  3. Distinguish the CAPM approach from an alternative dividend-growth approach.

Constraints

No company-specific inputs or numerical assumptions are provided. Give the formula, explain the inputs, and identify the information required to calculate a numerical result.