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The cost of equity capital is the rate of return investors expect to receive from investing in the firms stock. There are two primary methods
The cost of equity capital is the rate of return investors expect to receive from investing in the firms stock. There are two primary methods for determining the cost of equity. One approach is to use the Dividend Growth Model to determine the required rate of return on the firms equity. A second approach is to use the Capital Asset Pricing Model (CAPM) to determine the expected or required rate of return for a firms stock. Explain which you would use and why?
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