The cost of equity is defined by Investopedia as, “the compensation the market demands in exchange for owning the asset and bearing the risk of ownership.” Or to put it another way, the cost of equity is the return of a firm theoretically pays to its equity investors to compensate them for the risk of investing in the common equity.
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The cost of equity is a fundamental concept of the world of finance. Investors need to be compensated adequately for the risk they are taking on by entrusting a...
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