Estimating the cost of equity

This free course, Estimating the cost of equity, looks at how to estimate the cost of equity using the dividend valuation model (DVM) and the capital asset pricing model (CAPM), and how to evaluate the use of the DVM and the CAPM from a financial and strategic perspective. It then explores the implications regarding selection of the inputs to the DVM and CAPM and assesses the implications of using the beta measure in the CAPM.

• Introduction
• Learning outcomes
• 1 Estimating risk and return for shares
• 1 Estimating risk and return for shares
• 1.1 Rewarding risk
• 1.2 The risk-free rate
• 1.3 The equity risk premium
• 1.3.1 Estimating the future equity risk premium
• 2 Worked examples – Estimating risk and return for shares
• 2 Worked examples – Estimating risk and return for shares
• 2.1 Calculate the expected return on a share I
• 2.2 Calculate the expected return on a share II
• 2.3 Calculate the expected return on a share III
• 2.4 Find the equity risk premium (DVM approach)
• 3 Practice activities – equity risk premium (ERP)
• 3 Practice activities – equity risk premium (ERP)
• 3.1 Finding a risk-free rate
• 3.2 Choosing a risk-free rate
• 3.3 Calculating a risk-free rate
• 3.4 Finding an equity risk premium
• 4 Evaluate – The ways of calculating ERP
• 4 Evaluate – The ways of calculating ERP
• 4.1 Identifying the ERP
• 4.2 Global ERP
• 5 Experts speak – The ERP dilemma
• 5 Experts speak – The ERP dilemma
• Conclusion
• Glossary
• References
• Acknowledgements