Cost of Equity Calculator
Originally published: 01/02/2021 08:13
Publication number: ELQ-62113-1
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Cost of Equity Calculator

Excel Based Cost of Equity Calculator for DCM and CAPM methods

Description
There are two ways a company can raise capital: debt or equity. Debt is cheaper, but the company must pay it back. Equity does not need to be repaid, but it generally costs more than debt capital due to the tax advantages of interest payments. Since the cost of equity is higher than debt, it generally provides a higher rate of return.

The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership. The traditional formula for the cost of equity is the dividend capitalization model and the capital asset pricing model (CAPM).

The Excel calculator provides information on the above two methods and helps you calculate the cost of equity capital.

Note: All the research done by us is only for educational purposes and should not be seen as Investment recommendations. We are Research analysts and not a SEBI registered Investment Advisor. My research completely reflects my personal opinions and not of my employers. Kindly do your own due diligence before Investing

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  • Sagar soni(last updated: 28/02/2021 09:03)

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