This cost of equity calculator requires the following information: Next year’s dividends per share, current mark value of the stock, and growth rate of dividends. Enter this information into the form below to calculate the cost of equity.
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Cost of Equity Formula
The following formula can be used to calculate cost of equity.
COE = (FDPS / CMV) + GRD
- Where COE is the cost of equity
- FDPS is next year’s dividends per share
- CMV is the current market value of the stock
- GRD is the growth rate of the dividends
Cost of Equity Definition
A cost of equity is defined as the net cost of equity or the ratio of the growth of dividends to the current stock price.
How to calculate cost of equity?
How to calculate cost of equity
- First, determine the current stock value
Look up the current stock value of the security you are analyzing.
- Next, estimate next year’s dividends per share
Based on the current stock price and % dividends, calculate next year’s dividends per share.
- Determine the growth rate of the dividend.
Calculate the growth rate of the dividends using next year’s value and the past year’s value.
- Calculate the cost of equity
Enter the information from steps 1-3 into the equation to calculate the cost of equity.
The cost of equity is a financial term used to describe the growth rate of dividends with respect to the current stock price. In other words the net cost of the stock at the current moment.