3.2. The cost of equity

The cost of equity reflects the return that equity holders demand for the risk that they take while investing. There are several methods to calculate the cost of equity:

Remember: these models are require information that is only available for public companies (the ones that are quoted on the stock markets), which actually represent a very small number of the companies in any given economy. For non-listed companies, you will need to take assumptions based on similarity with public listed businesses and adjust assumptions as necessary.