The two main formulas for determining the cost of equity are the capital asset pricing model (CAPM) and dividend discount model (DDM). Each formula serves a different purpose, with CAPM being the ...

To compensate for the increased risk, investors typically demand a higher return. Calculation of the cost of equity is based on the capital asset pricing model formula: Cost of equity = Risk free rate ...

Conversely, a lower WACC signals relatively low financing cost and less risk. "The formula uses the cost ... You can estimate a company's cost of equity using models like capital asset pricing ...