Valuation

Cost of Equity

Definition

What is Cost of Equity?

The return required by equity investors for bearing ownership risk.

Example in practice

A riskier company has a higher estimated cost of equity.

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The price at which an asset could trade in the market at a given time.

An estimate of an asset's underlying economic worth based on expected cash flows, assets, or earning power.

An estimate of an asset's appropriate value under specified assumptions or accounting standards.

Present value of expected cash inflows minus present value of expected cash outflows.

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