How do I calculate the equity?
Calculating the cost of equity is an important step for any company looking to make an investment or project. The dividend capitalization model is a popular method to use when calculating the cost of equity, as it requires that a company pay dividends. The formula for calculating the cost of equity using the dividend capitalization model is
r = D1/P0 + g, where r is the cost of equity, D1 is the dividend paid next period, P0 is the current stock price, and g is the expected growth rate of the dividend. Sourcetable provides powerful tools for calculating the cost of equity.
What is Equity used for?
Equity is used to calculate several key financial ratios, such as Price/Earnings ratio, Price/Book Value ratio, and Return on Equity.