Cost of Equity

The cost of equity is the return that investors expect to earn from their investment in a company's stock. It represents the compensation investors require for taking on the risk of owning the company's shares, considering factors like market volatility and the company's financial health. Essentially, it's the "price" a company pays to attract investors who are willing to buy its stock instead of safer alternatives. This rate is important for companies to evaluate whether new projects or investments will generate enough return to justify the risk of raising funds through equity.