Establishing the cost of equity is the most arbitrary and difficult part of developing a firms cost

Question:

Establishing the is the most arbitrary and difficult part of developing a firm’s cost of capital. Outline the reasons behind this problem and the approaches available to make the best of it.

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...